Official Report 1106KB pdf
The next item of business is a debate on motion S6M-16595, in the name of Kate Forbes, on increasing investment in Scotland. I invite all members who wish to speak in the debate to press their request-to-speak buttons.
15:27
Increasing investment across the Scottish economy is a defining challenge for our times. For many years, persistently low levels of investment in Scottish businesses and Scottish projects have held back improvements in productivity and limited our economic growth. That problem is not unique to Scotland—the same has been true for the United Kingdom as a whole over an extended period.
However, increasing the levels of private investment in our economy is essential for everything else that we want to achieve. It is essential for growth and prosperity, for tackling the climate and nature emergencies, for eradicating child poverty and for improving the public services on which we all depend. Without a step change, we will not succeed.
If the challenge in front of us is daunting, the opportunity is enormous. UK investment institutions manage nearly £11 trillion in global assets. Scotland-based firms alone manage some £490 billion. If we can secure more of that capital for Scottish businesses and Scottish projects, the effect will be truly transformational.
Does the cabinet secretary agree that the regulatory framework that is set by the Scottish Government is absolutely essential with regard to the signals that it sends to the marketplace about investment? In that respect, does she share my concern about the fact that, according to experts in the finance and housing sector, we have lost more than £3 billion-worth of investment in the build-to-rent sector because of the Government’s policy on rent caps and rent controls?
I agree with the principle that the regulatory and policy environment is critical in giving investors certainty. I am in no doubt that investors have no obligation to invest in Scotland—it must be attractive for them to do so. That is why we have listened to the concerns of investors and have adjusted our position. We are currently consulting on the best way of ensuring that the system strikes the right balance between vital protection for tenants during a cost of living crisis and the need to attract investment that will deliver new and improved rented housing, the supply of which we have to increase.
In addressing the challenge that I have set out, Scotland has a wealth of strengths and advantages to build on. We have innovative and dynamic businesses, world-class research and technology capabilities, strong financial services and food, drink and tourism sectors, sustained success in attracting foreign direct investment and unrivalled potential to be a global leader in renewables.
However, we also have a Government that is committed to doing what it takes to make Scotland a more globally competitive, investor-friendly nation. Our approach has been guided by the First Minister’s external investor panel, which reported just over a year ago. It challenged us to be clearer in our strategic direction, more sure-footed in engaging with investors, and swifter and more decisive in acting to support delivery.
That is why, last summer, we published the green industrial strategy and, in our programme for government in September, committed to delivering a co-ordinated programme to attract private capital investment at scale in three priority areas—net zero, housing and infrastructure—and to align the whole of the Government and its agencies in support of that goal. The First Minister asked me to lead the work across the Government to meet that commitment. That work is well under way, and I welcome the opportunity to update members on it today.
However, before I explain the substance of the work that we have done, I extend an invitation to cross-party spokespeople to have a meeting with me and officials who can answer any questions on the programme. I know that we all have an interest in attracting investment and in making Scotland a great place to work, and we all have the opportunity to amplify the positive message about Scotland. I am happy to get in touch shortly after the debate to arrange such a meeting.
Our programme of work has three main strands. First, we are creating a single national pipeline of strategic investment opportunities. Secondly, we are improving the approach to investor relations across the public sector. Thirdly, we are examining how we can use financing models and instruments in the most effective way to de-risk projects.
Work on the internal pipeline is proceeding well, drawing on detailed, on-the-ground intelligence held by delivery bodies. When fully operational, it will give us a single source of truth on the most important opportunities, enable us to take a more targeted and proactive approach to engaging with major investors, and help us identify and tackle potential barriers and blockers to investment.
Over the coming months, we will launch a new outward-facing investor portal as a single shop window for current opportunities across the country. In parallel, we will continue to roll out our strategic investment of up to £500 million to leverage additional private investment of £1.5 billion in the infrastructure and manufacturing facilities that are critical to growth in the offshore wind sector. Activity is gaining pace, following on from last year’s landmark commitment by Sumitomo to build a £350 million cable manufacturing facility at Nigg and Haventus’s groundbreaking £400 million plan to redevelop Ardersier port. I visited the port last week, and I have to say that it took my breath away. Seeing is believing. I am sure that Haventus could accommodate visits from interested members from across the chamber, because nothing that I say today can truly convey the scale of the facility or what it can achieve for Scotland’s supply chain. I am also particularly delighted that it is located in the Highlands.
However, the opportunities are national. Last month, the Scottish National Investment Bank announced an investment of £20 million in subsea cable manufacturer XLCC, which is part of a wider transformation at Hunterston.
Hear, hear.
I hear cries of delight at that from Mr Gibson, who is sitting behind me. Two weeks ago, Highlands and Islands Enterprise announced £5 million for the Scapa deep water quay project, and just this morning, SNIB announced an investment of £6.7 million for Subsea Micropiles, alongside £2.5 million from Japanese investor Marubeni, to develop technology that will unlock opportunities in floating offshore wind. Over the coming weeks, I expect that pace to pick up further still. The momentum is there, spurred on by this Government’s willingness to support investment, the clarity of our policy and our regulatory environment.
At this point, I want to emphasise the bank’s wider contribution. As Scotland’s impact investor, it plays a critical role, not just on offshore wind but right across the economy. To date, its investments of some £700 million have crowded in £1.4 billion from others, and support from our enterprise agencies for businesses and infrastructure is leveraging significant private sector investment. Alongside development of the pipeline, we are working to improve the way in which we engage with investors to deliver a more agile and seamless response to them, especially when they want to discuss specific opportunities.
To achieve that, we are reviewing roles and responsibilities across the public sector ecosystem, we have improved information sharing and co-ordination and we have established a new approach to relationship management. Within the Government, we have focused resources to co-ordinate activity across portfolios, to identify and tackle problems and to work across organisational boundaries to ensure that the system delivers more than the sum of its parts.
To make a difference, we need to understand investors’ needs and priorities. In recent months, I have been engaging personally with major investors with an interest in our priority areas, and that activity will continue to intensify. Next month, the First Minister and I, together with ministerial colleagues, are hosting a global offshore wind investment forum here in Edinburgh, bringing together 100 senior investors and developers to discuss specific opportunities and to further highlight what we have to offer.
Alongside having a strong pipeline and improving investor engagement, we need to ensure that we have at our disposal a full range of financing models and instruments that can be used to de-risk projects. Perhaps I can give just two examples: we are working with the bank and others to consider how public sector guarantees can best be used, and we are taking forward at pace the work on a Scottish bond.
The Deputy First Minister might note that other countries have a model by which they take strategic equity investments in key firms to secure them for the long term. Is the Government considering developing such a model?
We look to our enterprise agencies and the bank to invest in high-growth-potential companies in the most appropriate way. A range of options is available to them, but, in short, we would generally work through arms such as the enterprise agencies and the bank to do something like that.
I have outlined what we are trying to do, but it requires close and effective collaboration with the UK Government, especially on regulatory issues, where many of the levers lie, and strong partnerships with bodies such as the National Wealth Fund, Great British Energy and the Office for Investment. Early signs from the UK Government are encouraging. We need to build on that and make co-operation systematic, and we need to do that quickly. We will play our part, and we look to the UK Government to do likewise.
In conclusion, there is much to be done if we are to meet the investment challenge for the benefit of the health and wellbeing of our people and planet. We have a plan, and although success never comes overnight, we are beginning to make a difference. I would welcome colleagues across the chamber joining us so that we can, as I have said, answer any questions that they might have. More than that, I ask them to amplify the opportunities for Scotland and to attract the investment that is needed to make them a reality.
I move,
That the Parliament agrees that increasing the level of investment in the Scottish economy is critical to delivering on the Scottish Government’s priorities of improving public services, supporting a thriving economy, tackling the climate emergency, and eradicating child poverty; recognises that the Scottish Government’s programme of public investment, particularly in the priority areas of net zero, housing and infrastructure, is vital for leveraging private investment across the Scottish economy, to stimulate growth in key sectors, improve productivity and create jobs; welcomes the annual EY survey, which shows that Scotland is outpacing the UK as a whole when it comes to securing Foreign Direct Investment (FDI) projects, and three Scottish cities ranked in the UK’s top 10 locations for FDI outside of London, and believes that Scotland’s strengths and expertise in areas such as technology, financial services, food and drink, tourism and the energy transition make Scotland the ideal place to invest and deliver projects that bring wider benefits to the Scottish economy.
15:38
I remind members of my entry in the register of members’ interests. I derive some income from a private rented property and I have received hospitality from the Scotch Whisky Association.
The Scottish Government is correct to recognise the value of investment in driving forward Scotland’s economy. Economic growth is vital to us all, both as a good in itself and as a generator of the tax revenues that we all want to see to fund our vital public services. As we know, our growth has been too low for too long. Even the relatively historically low levels of growth in recent times at a UK level have not been matched by the performance of the Scottish economy, and that has to change.
That is where the cabinet secretary is quite right to say that there is a role for investment—that said, the Scottish Government’s motion is, for us, as ever, simply too self-congratulatory. There are substantial issues in relation to the level of investment that we need to attract to deliver the faster economic growth that we all want.
I will break my remarks into two parts. First, I will talk about the investment by the public sector. Public spending has a vital role in investing in the infrastructure that our economy needs to succeed. For too long, we have been waiting for the promised delivery of the dualling of the A9. That project is of vital importance to my constituents in Mid Scotland and Fife, the Deputy First Minister’s constituents, others across the Highlands, and the vital Scotch whisky industry, which relies on both the A9 and the A96, for which dualling is on the back burner, to get their goods to market. The point that has been made regularly by representatives of the whisky industry is that those two infrastructure projects are vital.
Will the member take an intervention?
Let me finish this point and then I will give way. Those infrastructure projects are absolutely vital in terms of their ability to expand their businesses.
Will Murdo Fraser reflect that it is not just about getting goods to market but about integrating supply chains? The whisky coming down the A9 will very often be bottled in the central belt, so roads provide a vital link between rural and urban economies. Does he think that we need to refocus on road infrastructure in that way?
Will the member take an intervention?
Oh my goodness. They are coming from all sides, Presiding Officer.
I agree with Mr Johnson. Let us hear what Lorna Slater has to say, which might not be so agreeable.
We all want infrastructure so that we can move goods and people around the country, but there is no particular reason why those goods could not be moved by rail if our rail system was upgraded. Investing in roads this late in a climate emergency is not a sensible use of money.
I simply disagree with Lorna Slater on that last point, but I agree that, where there is the capacity to move goods by rail, we should take that opportunity. Many companies, Tesco being one of them—we often see its goods moving by rail—use that facility. However, for products that are produced in places that are not close to a railhead, such as the products of the Scotch whisky industry, that would burden industries with substantial additional costs. Rail is not a panacea, but the general point is fairly made.
While we are talking about rail, let me say that we still have a substandard service. I have raised the service and connectivity that my constituents in Fife get between Fife and Edinburgh in the chamber so many times. The situation is holding back economic progress. As we are talking about whisky, let me also mention ferries. When the cross-party group on Scotch whisky visited Islay the summer before last, we heard that the biggest brake on the expansion of the whisky industry on that island—which is already seeing substantial additional investment and new facilities being formed—is the reliability of the ferry service. That is the biggest concern there and, again, something that is entirely in the Scottish Government’s gift.
Connectivity is not just about transport. We were promised that every address in Scotland would be connected to superfast broadband by 2021. That is another promise that has been broken.
Will the member take an intervention?
Yes, if she will tell me what will happen on that point.
I will just make a comment. The member talked about our motion being too self-congratulatory. He is anything but congratulatory about the strengths of the Scottish economy. We make points in our motion about an EY survey saying that Scotland is “outpacing the UK” as a whole, and about the ranking of three Scottish cities in the UK’s top 10 locations for FDI outside London. Even if he does not credit the Government with that success, will he not at least recognise the success of the Scottish economy in attracting investment, or will his speech entirely downplay our potential?
I am pleased that the Deputy First Minister has raised the EY survey. I read a very interesting quote from Ally Scott, who is the managing partner of EY Scotland. He said:
“We still hear frustrations from clients and the market that Scotland’s tightening economic policies, including the latest income tax hikes and issues around city and infrastructure quality, are causes for concern.”
I am happy to give praise where there is good progress, but there are still issues.
I return to the point on broadband. Constituents have told me that they are now expecting that it will be the end of the current decade before they get superfast broadband—nearly 10 years after it was promised—and that that is holding back economic progress.
Let me turn to private sector investment. We are losing out on private sector investment that is going elsewhere. I commend to ministers—if they have not already listened to it—the evidence that we took yesterday in the Economy and Fair Work Committee in which Jane Wood of Homes for Scotland, among other witnesses, highlighted the key question that is being asked by investors, which is: how easy is it to do business in Scotland? We are in competition for capital with other parts of the UK and other parts of the world, and, unless we have a more business-friendly environment, we will continue to struggle to attract that level of investment.
I will give just one example of where private investment is being deterred that was given to us by Homes for Scotland. The average decision time for a major housing application in Scotland today is 59.8 weeks, against a statutory timetable of 16 weeks. If that sort of issue is not tackled, we will continue to see challenges in attracting investment.
In the housing sector more generally—I made this point in an intervention a moment ago—we have seen investment driven out of Scotland due to the moronic policies that Patrick Harvie put forward when he was the minister with responsibility for tenants’ rights in the coalition. The rent freeze, the rent cap and, now, the proposed rent controls in the Housing (Scotland) Bill have had a disastrous impact on inward investment to Scotland in the build-to-rent sector.
We know that there is a housing emergency, and the Scottish Government has accepted that there is, but its choices have contributed to that situation.
Will the member take an intervention?
No, I need to make some progress.
According to experts in the world of finance and property, we have lost more than £3 billion of investment that could have gone to providing homes for rent but which has instead gone elsewhere. That £3 billion could have helped to solve the housing crisis, provided affordable places for people to live and provided jobs in the construction sector. According to the Scottish Property Federation, it will take more than a decade for investment in rented property in the build-to-rent sector to recover from the mistakes that have been made by this Government. Further, if the policy of rent controls continues, it will not recover.
Let me give one more example of where private investment is being deterred.
Be nice.
I am being invited by the Deputy First Minister to be nice, but I am simply encouraging her to make a few minor tweaks to policy. Money would flow into Scotland if only she did so, and one minor tweak to policy could be made in relation to the Scottish Government’s approach to civil nuclear technology. We have in Torness a plant that, for half a century, has delivered reliable, affordable energy to homes across Scotland.
Will the member take an intervention?
The member is bringing his remarks to a close.
My apologies, Mr Sweeney.
There are investors who are prepared to fund a replacement of Torness. It is only the short-sighted policies of this Government that are preventing that from happening.
Will the member take an intervention?
The member is about to conclude.
Investment will come when there is an attractive regulatory and tax environment. As we saw in the budget that was passed by Parliament on Tuesday, creating such an environment is not an ambition that the Scottish Government seems to share.
There is much more that we need to do in terms of public spend and attracting private investment to deliver the economic growth that we need. Those are the points that are made in my amendment, which I am pleased to move.
I move amendment S6M-16595.2, to leave out from “on the” to end and insert:
“economic growth; believes that public sector investment in infrastructure is essential in facilitating growth and therefore notes with alarm the delays to, and uncertainty around, the project to dual the A9 from Perth to Inverness and the Scottish Government’s temporising on dualling the A96; recognises that private investment is necessary to maintain a supply of core goods and services, and therefore condemns the severe damage done to the build-to-rent housing sector by rent cap schemes; acknowledges that success in attracting foreign direct investment is measured as much in project value as in project count; urges the Scottish Government to reverse its opposition to nuclear energy, which limits both investment in energy projects as well as the long-term supply of reliable energy near where it is in demand; emphasises that investment is intrinsically linked to the availability of skilled labour, and notes, therefore, with concern that the Scottish Government’s highest-in-the-UK income tax rates are limiting industry access to skilled workers, thereby undermining investment and economic growth.”
I advise members that, at this point in time, we have a bit of time in hand, which is why I was able to be a bit generous with Mr Fraser in the light of his generosity in accepting a number of interventions.
15:47
This afternoon, we have heard the Government’s overly positive view and Murdo Fraser’s very negative view, so, once again, it falls to me to provide something of a third way.
I genuinely welcome this debate, which the Government has brought to the chamber, and I accept the challenge from the Deputy First Minister. The challenge for all of us is to focus on what needs to be done to attract investment in this country. I think that the Deputy First Minister is absolutely correct in her analysis that Scotland, along with the United Kingdom, suffers from low levels of investment. Whether we are concerned with economic growth or how we tackle the challenges of net zero and demographic change, we need investment to address those issues and ensure that we maintain prosperity for as many Scots as possible. Investment is the only way through that.
I welcome and accept the Deputy First Minister’s offer of cross-party talks. I very much believe that they would be constructive, because we need to find points of consensus and provide a team Scotland approach. If we are serious about attracting international investment, we need simplicity and clarity, but, importantly, we also need to show something of a united front across the political spectrum.
Let me address the three themes that the Deputy First Minister’s investment approach will take. I hope that members will forgive me because I only heard about it in her comments, but I agree with the pipeline. We need to focus on that. My one comment on the pipeline is that, having spoken to a number of investors, it is not necessarily about identifying individual projects. When I speak to investors and investment firms, they tell me that they are seeking clarity on our national objectives and on the planning and regulatory framework that supports them. I am not sure that Government should be in the business of identifying individual projects, although it should potentially do so for large ones. It is absolutely vital that we have clarity of objectives and stable, clear and consistent policy across not just the economic policy domain, but all Government policy.
The Deputy First Minister’s other points were also clear. The engagement point is absolutely correct, but we have to question whether we can provide that. We have a cluttered landscape and I recognise that that is not an easy challenge to fix, but, when we talk to people globally, we hear that they find a complex array of different agencies and organisations to speak to in Scotland.
I welcome Ms Forbes’s comments about investment models. We can look at investment in infrastructure in other parts of the world, particularly in northern Europe, where tunnels have been constructed in the Faroe Islands, which have been vital not just to supporting growth but to repopulation. There are interesting models there. We need to look at those collectively, because those are the sorts of things that need a degree of political consensus so that investors can have the confidence to invest in them.
I very much appreciate the Deputy First Minister’s comments, and there is much to build on. However, although we will support the Government motion, I believe, a little like Murdo Fraser, that we need to take account of the broader context. The Deputy First Minister is quite right to highlight the points in the EY report, but she omitted a key comment. The report says:
“There’s a growing sense that Scotland’s cities may be losing out to rivals like Manchester”.
Likewise, although she is correct that Scotland fares very well in the EY report, if we look at other data, such as Office for National Statistics data, and at inward investment on the basis of numbers of jobs created and the value of projects, we see that Scotland lags behind the north-west of England and the West Midlands by some margin. Indeed, when it comes to the fundamentals over the past 10 years, growth in gross domestic product per head in Scotland has been around half of that in Manchester. Although GDP per head in Scotland is higher than that in Manchester and the north-west, we just need to look at what is going on.
We have more levers in Scotland, but the question is whether we are using them as effectively as we can.
I am interested in the point about cities attracting investment. Daniel Johnson made a point about Manchester, and we had an exchange about that at committee. Without putting words in his mouth, I imagine that he would suggest that it has been Manchester’s leadership that has delivered the success and not necessarily the Conservative Government in London. My point is that cities have powers. What makes the difference in cities being able to buck the trend?
The structure of the combined authority in Manchester allows the constituent borough local authorities to unite around a clear plan. The secret to the success in Manchester is the degree to which the combined authority provides a point of unity and co-ordinated action rather than an additional structure.
We need to look at the barriers to investment. I have already mentioned the enterprise agencies. The real question is whether they focus on the right things. They do a great deal that is positive, whether that is Scottish Development International or the co-investment funds. Those are areas where they do well, but I question whether their focuses are correct. All too often, businesses in key sectors, such as tourism, that are important to the economy get turned away because they are not in the right sector.
There is a question whether the agencies should focus purely on initial investment or whether they could do just as much by winning repeat investment. For example, in Scotland, we have 25 per cent of Pernod Ricard’s globally invested capital, but that is as a result of repeat investment. Likewise, I have heard from financial services firms that have invested here despite the lack of help from Scottish Enterprise rather than because of its help.
I fear that I need to close, but I will say that there are points around skills, and I agree with the Conservatives’ points about infrastructure and connections. I also agree with their point that we need to remove build-to-rent properties from the rent restrictions.
Finally, in the budget debate the other day, I misquoted a number. Kenny Gibson challenged me, and he was absolutely correct to do so. I have taken the opportunity to correct the record on that point in the chamber.
I move amendment S6M-16595.1, to insert at end:
“; recognises the best practice that is happening across the UK, including in Greater Manchester, where joined-up working across the public and private sector, investment in infrastructure, and an industrial strategy have boosted investment in the region; notes Department for Business and Trade statistics showing that Scotland comes seventh out of 12 for jobs created by inward investment projects, compared to fourth for the North West of England, and believes that the Scottish Government and Scottish Enterprise have failed to maximise Scotland’s economic potential and provide support to sectors that are key to Brand Scotland and attracting inward investment, including tourism, food and drink, and financial services.”
15:55
I am delighted that we are having this discussion today, because it means that we have shifted the Overton window away from the view that was prevalent in the early days of the Conservative Government at Westminster, which was that economic growth could be achieved by throttling back public investment on the false premise that public investment drives out private investment. We are now in an evidence-based space where we are listening to experts again and where we recognise that public investment draws in private investment and gives private investors and business owners and managers confidence in the direction of travel. When the Government puts its money where its mouth is, it sets out a vision for the future, and when that vision is full of opportunity, people will sign up to it.
This week, the Confederation of British Industry has reported a 10 per cent increase in the UK’s green economy—double-digit growth. That is what we have all been looking for, right? Green businesses in the UK collectively generated £83.1 billion of gross value added in 2024. The CBI report calculated that, for every £1 of that GVA, an additional £1.89 of GVA was created for the wider economy. In other words, the economic benefits, including that ripple effect, exceeded £157 billion. The future is green. If we are looking for growth, we will find it in the green economy.
The CBI report makes it clear that green industries are primed for further rapid growth if policy makers create the right regulatory environment for them. The CBI warns the UK that, should it
“fail to capitalise on this opportunity ... it risks losing out to international competition”.
The CBI’s chief economist, Louise Hellem, said:
“It is clear, you can’t have growth without green ... 2025 is the year when the rubber really hits the road—where inaction is indisputably costlier than action. We are approaching critical points of no return for achieving essential outcomes in energy security and emissions reduction. Long-term sustainable growth is unattainable without a future powered by clean, affordable, and secure energy.”
Members have heard it from the CBI, even if they do not like hearing it from me.
There is no contradiction between being ambitious in decarbonising and having a thriving economy. Indeed, the risks come from moving too slowly, from falling behind other countries and from letting them take innovation and technology developed in Scotland and build industries based on them. That happened with wind turbines to the point that, although jackets are fabricated here, wind turbines are not manufactured here. I worked on the first tidal turbine in Scotland that generated green hydrogen—both technologies in which Scotland is a world leader.
The member has touched on the most pressing issue of this year, which is how we invest up front in the supply chain so that we do not have a repeat of the notion that our wind is generating a lot of economic opportunity for other countries, which are producing the turbines. What are her views on the fact that that will require up-front public investment in private enterprise, in many cases, to de-risk projects and to attract the jobs into the supply chain so that they are ready when the developments get their consents?
That is absolutely what is needed. Members will know from my entry in the register of members’ interests that I used to work for Orbital Marine Power on a project that was funded in exactly that way—with a mix of funding from the Scottish Government and private investors. That is absolutely the way to move the technology forward.
Under the Conservative Government, contracts for difference removed tidal energy, for example, for years. That is now back in place, thanks to the Labour Government. Some of these matters are reserved, so hopefully the new relationship between the Governments means that we can overcome the regulatory hurdles to move this forward.
However, to do that we need to make a strong pivot towards those technologies, and that means clearly turning away from old, declining technologies in declining industries, such as oil and gas. If we want growth, we need to invest in growing industries, not in declining ones. We are risking losing the lead and watching other countries get the jobs and the factories.
I am out of time, so I will finish my remarks in my closing speech.
16:00
I welcome the hard-nosed focus that the Government is bringing to the debate—it is long overdue. We need to celebrate our great assets in Scotland. Nobody in the chamber would deny those great assets. The pipeline, the building of relationships and the de-risking approach that the minister has set out are welcome steps.
However, there are two real priorities that need to be central to the Government’s thinking, one of which is caution with regulation and taxation. If we are going to increase those things, we need to make sure that we know where the end point is, so that people have confidence in the Government’s relationship with taxation, and equally so with regulation.
We also need long-term consistency. Businesses do not have the time to follow every in-and-out of politics. They want to know what the direction of travel is, and they want the Government, by and large, to stick with it. I have heard Ivan McKee speak about that before. Every press release that comes from the Government must signal very clearly what is new, what is different and what people or businesses need to pay attention to—that is, what businesses need to do today in response. There should be no more puff press releases that are dressed up as something new when they are not. We need long-term consistency and caution on regulation and taxation.
Some of the sectors that I will cover have been covered already, though others have not. One of those is renewables, both onshore and offshore. We should not forget onshore renewables, because a lot of developments are still taking place—with onshore wind in particular—and there are also pumped storage facilities.
A huge surge of work is coming. Are we ready for it? We need to be ready for a number of things, some of which have been mentioned. First, there is the consenting process. We need to have enough planners with enough skill to process the applications quickly and get them approved, so that the companies can see that the licences that they have secured will result in an output quite soon.
Secondly, there is infrastructure, by which I mean roads but also housing. There is no point in developing opportunities for work in remote parts of the country if there is nowhere for the workers to live. Equally, having facilities for pumped storage will require a significant upgrade to the roads in those communities. I would argue that we should look to use some of the community benefit that is coming from those projects to invest in them, just as the Faroe Islands have done in developing tunnels and other infrastructure.
Thirdly, there is skills. We ensured that a college skills programme was included in the budget, because that is an essential part of the programme. Some of it is about reskilling and upskilling in the move over from oil and gas, but, first and foremost, it is about skilling.
Then there is the supply chain. We cannot repeat the mistakes of BiFab and Harland & Wolff, whereby workers in Methil can see the turbines from their houses but there is no work in the yard just down the road to build those turbines. That is my deep concern about Liberty Steel, which I mentioned to the First Minister at lunch time. The Government had better have a plan for what is coming, because I can see Gupta collapsing quite soon and that plant, which has already had no production for several months, being in significant trouble. It supplies the foundations for onshore wind farms, so we must pay attention to that.
Will the member take an intervention?
I am almost out of time.
I have deep concern about investment in universities. They are centres of innovation, but there is a decline in the funding arrangements for those institutions. That is having a direct impact on our research performance, which used to be among the best in the UK but is now sliding. That research is important for spin-outs for licensing but also for ensuring that there is an ecosystem of businesses around those institutions.
On that point, I conclude.
We move to the open debate.
16:04
The UK economy is not delivering for the average Scot. The costs of basics—food, energy and housing—have gone up much more quickly than inflation has risen, and wages are not keeping up. The problem has reached breaking point with the cost of living crisis, but it has been a long time in the making.
A large part of that is down to how the UK has run our economy. It has overseen deindustrialisation. It has handed key industries to the private sector. It has isolated us with Brexit, which has closed off markets and locked out skilled workers. It has allowed a situation to arise in which we now talk in the chamber about in-work poverty. The UK economy does not work for our workers.
The north-east is one of the few exceptions to that deindustrialisation, and that has served everyone well. The oil crash aside, industry has supported jobs and has underpinned our local economy in Aberdeen. On a UK level, it has provided energy security, and North Sea revenues have propped up Governments of every shade. If the vast wealth from Scotland’s oil had been reinvested in Scotland, we would perhaps be having a different debate. However, we need to deal with what is in front of us. Whether the oil runs out or is phased out, we are moving into a new chapter in Aberdeen’s story. The just transition and the global move to net zero offer a golden opportunity for the north-east and Scotland as a whole, but we need the investment to make that work.
The Scottish Government has already stepped up to the plate with a £500 million just transition fund. With another £500 million to develop the offshore wind supply chain and a range of other investments, such as £100 million for digital infrastructure, £200 million to fund the Scottish National Investment Bank and £320 million for enterprise agencies, the Scottish Government is putting money where it is needed to support existing industries and nurture new ones. The UK Government would do well to step up to the plate and at least match the just transition fund.
Beyond direct investment, our Scottish Government is doing a great job of marketing Scotland. I accept that that might not seem like a hard job at times, as we have an awful lot to offer, but that work is bringing in investment and creating jobs. When it comes to inward investment, Scotland is outperforming every part of the UK except London. When it comes to foreign direct investment, Scotland outpaced both the UK and Europe in FDI growth last year. Aberdeen was the eighth-best city outside London for FDI, with Edinburgh and Glasgow also in the top 10.
Since 2007, when the SNP came to power, gross domestic product per person in Scotland has grown by 10.5 per cent, compared with growth of just 6.5 per cent in the UK. I want that success to continue in spite of Labour’s shambolic approach to the economy. Labour is risking north-east jobs with an extended windfall tax, taxing work with a national insurance rise for employers and refusing to break down trade barriers by rejoining the single market. However, I am pleased that, whatever barriers the UK Government puts in Scotland’s way, whatever shade of UK Government we have and for as long as we have a UK Government, the Scottish Government is continuing to bring in investment and is getting on with the job of making Scotland a fairer and more prosperous nation.
16:08
The Scottish Conservatives will always support increased investment in Scotland and believe that it can be enhanced through our commonsense plans to drive economic growth and cut taxes for workers and businesses. However, the SNP’s high-tax, low-income budget continues its 17 years of failure. Those failures are endless and range from a failing economy, a decline in education standards and a national health service that is in permanent crisis to the highest drug deaths rate in Europe.
Investment is key to Scotland’s future, but businesses are about to be hammered by the UK Labour Government’s national insurance hike and hindered by the SNP’s high-tax, low-growth agenda. The budget this week should have cut taxes for hard-working Scots and businesses; instead, the SNP’s proposals will stifle the economic growth that is vital to the future of public services in Scotland. After Labour’s crippling national insurance jobs tax, we needed a budget based on common sense and sound finances.
Investment is linked to the availability of skilled labour, yet the SNP has made Scotland’s income tax rates the highest in the UK, limiting industry access to skilled workers and undermining investment and economic growth. Economic growth should be front and centre of the policy agenda, and tone matters when investors are looking at where to put their capital.
Will the member take an intervention?
No.
There is a risk that a lack of policy alignment across other areas of Government will undermine that clear message. Rent caps are a good example. The damage done to the build-to-rent housing sector by the Scottish Government’s rent cap schemes is severe—£3.2 billion of private rented sector investment has been halted since rent control measures were put in place. Rents in Scotland have increased faster than anywhere else in the UK as a result. Concerned constituents here in Edinburgh constantly write to us about that very fact and the crippling impact that it has on them.
Transport is key to tackling inequalities across our country. Good transport links connect communities to schools, colleges, general practitioners, hospitals, dentists, shops, leisure facilities and people’s jobs. Whether it is ferries, trains, roads, potholes or public transport, it is clear that the SNP is failing to deliver on key services that are vital not only for the people of Scotland but for the economy.
Public sector investment in infrastructure is essential, as it facilitates the movement of goods and people, enabling businesses to operate efficiently, access wider markets and contribute to overall economic growth by increasing productivity, attracting investment and creating jobs. The need for investment in our roads has been glaring for years. The improvement of roads such as the A9, the A96, the A77 and the A75 is essential for sustainable economic growth as well as the protection of the communities on those routes.
That is why the delays to and uncertainty around the project to dual the A9 from Perth to Inverness and the Scottish Government’s temporising on dualling the A96 are alarming and anti-growth. Rural communities who depend on the A96 deserve better.
Will the member take an intervention?
Apologies—I have only four minutes.
We were promised that that lifeline road would be dualled all the way to Inverness by 2025, yet here we are in February 2025 and the promise has been repeatedly broken. We must also think about the A9—the backbone of Scotland. The failure to fully dual that key road has tragically resulted in far too many serious injuries and deaths.
More locally, simple improvements to rail infrastructure would bring obvious economic benefits. I am talking about improvements such as building a train station at Winchburgh to put a booming town of more than 3,400 new homes on the main Edinburgh to Glasgow line, and building the short Almond chord link to turn the Edinburgh Gateway station from a white elephant into a hub for the new west town that would be as busy as Haymarket.
As usual, the Scottish Conservatives are the party of common sense, which was clear from our budget proposals to cut taxes for workers and businesses. We believe that every penny of taxpayers’ money must be spent carefully to address the real concerns and needs of people up and down Scotland.
16:13
In 2023, the Fraser of Allander Institute said that Scotland’s economic future depends not just on its ability to attract investment but on the strategic vision to shape its own destiny. Fortune does not just favour the bold; it backs ambitious and prudent planning. I trust that the debate will spark discussion on ways in which we can enhance our investment potential.
Currently, Scotland stands at a crossroads. There is no shying away from the long-standing impact that Brexit and the 2008 crash have had on investment, as laid bare by the Institute for Government. However, Scotland is not sitting quietly in the back row of progress and has never been content to do so.
In renewables, Scotland provides 60 per cent of UK offshore wind capacity; that success is attributable not only to location but to forward-thinking policies and investments that are aimed at achieving net zero emissions by 2045—the Seagreen offshore wind farm alone is poised to become one of the world’s largest, with a staggering 1.1GW capacity.
Renewables are merely the tip of the iceberg. Scotland’s tech scene is thriving, particularly in artificial intelligence, software development and quantum computing. Our cities benefit from foreign-backed tech start-ups, which are fuelled by institutions such as CodeBase and the Scottish technology ecosystem fund.
In financial services, global heavyweights such as JP Morgan and Barclays are expanding their operations, drawn by Scotland’s exceptional talent pool and investor-friendly landscape. Those successes are worth celebrating, but Scotland’s ambitions should not stop there. The potential for economic growth is far greater and now is the time to push even further.
We must forge better ties with Brazil, India, China and South Africa, which collectively account for almost 30 per cent of global GDP and may drive the next wave of economic expansion. Deepening Scotland’s engagement with them will open the door to fresh investment and consolidate our place in the fast-evolving global economy. India’s booming tech sector could dovetail with Scotland’s strengths in fintech data analytics and software development. Brazil and South Africa, with their rich natural resources, present fertile ground for Scotland’s expertise in offshore wind, hydrogen and carbon capture technologies.
Another key opportunity for Scotland lies in our proven ability to nurture unicorn start-ups: Edinburgh-born giants such as Skyscanner and FanDuel are prime examples. By placing greater emphasis on incentivising high-growth companies to scale globally while they remain rooted in Scotland, we can strengthen our position as a leading hub for innovation and entrepreneurship. The Fraser of Allander Institute recommends that the Scottish National Investment Bank take on a more ambitious role as a co-investment partner for global venture capital firms, using targeted financial strategies to reduce risk in early-stage investments.
Meanwhile, Scotland’s international offices, which are often a target of criticism from Tory politicians who fail to grasp the value of soft power and economic diplomacy, must be scaled up in order to improve Scotland’s global footprint. As recommended in the 2023 Scottish Government international trade report, offices in Mumbai, São Paulo and Singapore will improve our presence in emerging markets and provide launch pads for investor engagement, business summits and partnerships.
Scotland has a huge opportunity to draw inspiration from other global economic powerhouses, such as Singapore and Ireland, both of which have expertly levered cutting-edge infrastructure and Government-backed innovation to create more dynamic and investment-friendly environments. For example, Singapore’s precisely designed innovation districts and Ireland’s aggressive research and development strategies have catalysed waves of investment and technological breakthroughs. By significantly scaling up our R and D funding, strengthening university-industry collaborations and expanding targeted support for high-growth start-ups in key sectors such as artificial intelligence, fintech and green tech, Scotland could follow suit.
On Wednesday 12 March, I will host a reception with more than 200 guests from Scotland’s critical technologies supercluster, which involves photonics, quantum and semiconductor technologies, to highlight its vital role in enabling our industries of the future, including on net zero, health, security and space. Members will hear about ambitions to grow the sector from generating £4.2 billion a year to generating £10 billion a year by 2035, generating 17,000 highly skilled jobs for Scotland. I urge all colleagues to attend.
Scotland has a strong track record of attracting investment and driving innovation. We must strengthen ties with global economic leaders, expand international trade and support high-growth industries. Reaching our full potential demands bold forward-thinking policies and the economic freedom to shape our future. By embracing ambition and seizing new opportunities, Scotland can build a more prosperous, competitive and resilient economy that benefits businesses, communities and future generations alike.
I thank Daniel Johnson for his fair-mindedness earlier this afternoon.
16:17
Many of the strategic challenges that we face—reaching net zero, tackling poverty and funding our public services—depend on driving investment for growth. In our globalised economy, in which competition for investment is fiercer than ever, we must ensure that Scotland remains an attractive prospect for business.
I welcome Edinburgh being named one of the UK’s top cities to invest in outside London. We have great strengths in finance, technology and life sciences. In a report on FDI attractiveness from law firms Wright, Johnston & Mackenzie and Irwin Mitchell, Edinburgh’s infrastructure and public transport were named as key factors in attracting investment. That includes Edinburgh airport, which has undergone massive expansion in recent years, and a publicly owned tram network, which has just had a record year for passenger numbers. If we want to drive investment in our economy, there has to be investment in infrastructure.
We also have strengths in our tourism and culture sector. Edinburgh’s festival season attracts more people each year than the football world cup does every four years.
Those areas are key to our economy and support hundreds of thousands of jobs, and they need to be more integrated into our economic strategy in order to attract investment. Collaboration between the private and public sectors can play a huge role in that regard.
We can learn a lot from Greater Manchester, which has the Media City creative cluster and has recently developed six growth locations to attract billions of pounds in business investment. A cluster that meets the needs of Scotland’s creative industry could be transformational in bringing private sector investment to an area of the economy that is often defined by Government support, increasing growth in the film and TV sectors, broadcasting Scotland worldwide and further developing brand Scotland. We should not discount Manchester’s combined authority system, which allows for a long-term regional strategy, and its great mayor, Andy Burnham, who can represent the city on the biggest of stages.
Lastly, I will touch on private equity investment, because 2024 was a record year for such investment in Scotland. Although those companies can create economic growth and reinvigorate business, they have faced criticism for unsustainable business practices and even asset stripping. We must be sure that foreign investment leads to jobs and sustainable growth.
We have many pull factors to attract investment, but the Scottish Government must not squander those by not investing sufficiently in our cities and infrastructure or by failing to partner with the private sector to deliver in our growth areas. If that happens, we will fall short in the race for global investment.
16:21
I direct members to my entry in the register of members’ interests, which shows that I am a member of Unison.
If we are to fully deliver on our priorities of improving Scotland’s public services, eradicating child poverty and tackling the climate emergency, increased investment in the Scottish economy is critical. In the short time that I have available, I will cover how two particular budget commitments are good for our economy.
The Scottish Government budget includes significant investment to support the economy. We know that the economy suffers when poverty thrives, which is why we have given more than £1 billion through the Scottish child payment since it was launched in 2021. Unlike the Labour and Tory parties, we know that the two-child cap must go. Investing in social security is not only the morally right thing to do; an investment in our people is an investment in our economy. Tackling poverty and growing the economy go hand in hand.
In our moves towards reaching net zero, we have provided opportunities across the economy that are vital for our future. In its budget, the Scottish Government is committing about £4.9 billion in capital and resource funding for activities that will have a positive impact on the delivery of our climate change goals. Capital funding of £150 million will be used to continue to anchor our offshore wind supply chain, which is part of a five-year commitment to invest more than £500 million in the sector. That investment by the Scottish Government is expected to leverage £1.5 billion in private sector investment and support thousands of jobs.
It is also welcome that more than £168 million will be invested to maximise the power of our land and forests to tackle climate change and protect nature. That spending allows us to protect and restore our natural environment, all while supporting Scotland’s rural economy and creating economic opportunities and green jobs.
Those examples of public investment in our country through social security and net zero spending are not only the right thing to do; they drive investment in Scotland and help our economy.
As a constituency MSP, I engage positively with businesses throughout Clydebank and Milngavie. They know that the most productive workforce is the one that has fair and decent conditions. I welcome the SNP Government’s support for measures to promote a work environment that values the workforce and our trade union movement.
Unfortunately, Labour sends mixed messages on that issue. Labour members talk a good game in the Parliament, but the mask slips when they are in power. I see that locally with the Labour-led West Dunbartonshire Council. Just this month, the excellent and well-informed Clydebank Post reported that the council has paused its threat to fire and rehire workers over holidays. The article quotes the GMB saying:
“We would like to thank you for your support in helping us get the process paused and we will continue fighting until the threat of fire and rehire is completely removed.”
Understandably, the GMB said that it “beggared belief” that a council would behave like that, and I totally agree. Labour cannot be trusted with workers’ rights or, more broadly, with our economy.
The Chancellor of the Exchequer has jumped deep into the Tory austerity playbook. Despite all that we do, our economic growth will continue to be hampered by the UK Government’s decisions and its Brexit policy. Slow growth, job losses and rising prices are direct results of Labour policies such as the national insurance tax increase and the decision to stay out of the European Union single market. Scotland can flourish, as we have so much to offer, but we need to be able to make our own decisions in areas such as immigration policy and rejoining the EU as an independent country. It is now clearer than ever that only with independence will our economy and public services truly thrive.
16:26
I am pleased to be able to contribute to this afternoon’s debate. I will support the amendment in the name of Murdo Fraser.
The motion mentions the importance of increasing investment in Scotland’s economy and it says that that investment is vital to improve public services, support a thriving economy and create jobs. There is no doubt that those are all worthy points, but the Scottish public should be surprised to find them at the beginning of a motion that was lodged by the high-tax, anti-business SNP Government. Although it wants to shout about the importance of investment in Scotland, it is hard to believe that it really means it.
The Government talks about investment in housing but, as we have heard, its rent cap policy harmed investment in that sector to the tune of £3 billion, and it will make many of the same mistakes with the Housing (Scotland) Bill.
The Government talks about investment in net zero. However, although it is willing to invest in alternative energy sources such as offshore wind, it has turned its back on nuclear energy—a decision that will cost Scotland billions in long-term investment. In reality, the SNP’s insistence on ignoring nuclear power will not only cost Scotland investment opportunities but make net zero harder and much more expensive to achieve.
The Scottish Government is right to talk about the importance of technology in financial services, yet its policies undermine that sector in Scotland. Although the fintech sector has enjoyed impressive growth in recent years, we are now seeing warnings that policies such as higher income tax are making it difficult for the sector to see sustained growth.
Scottish Financial Enterprise has said that its members are finding it harder and harder to attract and retain senior workers. In an SFE survey that received responses from 40 organisations that together employ more than 50,000 people in the financial services sector, 66 per cent of respondents knew of examples where Scotland’s business and tax environment was harming and having a negative impact on business decisions.
At the same time, leading headhunting companies have reported difficulties in attracting top talent to Scotland, particularly since the introduction of the advanced rate of income tax. The chief executive of SFE, Sandy Begbie, has highlighted that cutting taxes to at least the same rates as those in the rest of the UK could lead to greater investment and greater certainty in the Scottish economy. As Conservative members have said often in recent years, high tax does not support business or the economy. If the Scottish Government was serious about increasing investment in public services, it would be willing to listen to the proposals that are being made.
Scotland has the potential to lead the United Kingdom in many sectors, but it will be able to do that only if the SNP Government is willing to unlock that potential. It talks about Scotland being a leading destination for investment, but it is time that it backed up that rhetoric with actions. That means introducing commonsense policies that will attract investment and send a message that Scotland is somewhere that truly values success and talent. That success and talent will lead to the economic growth, investment and prosperity that we want. However, the SNP Government does little about that.
I support the amendment in the name of Murdo Fraser.
16:30
I hope to be able to cheer us up a little, to be honest. Frankly, I am delighted with the Scottish Government’s motion and its recognition—indeed, its celebration—of the importance of investment and of the value of using the Government’s ability to leverage in private finance. Of course, I completely agree with the priorities.
Increased investment is vital for growth and productivity, but by itself it is not enough. It has to be in a policy setting that encourages entrepreneurship and innovation, for it is those that create new products, services and businesses, leading to increased productivity. Investments will not deliver as much as they could if they are accompanied by disincentives such as the rise in employer national insurance contributions, which acts against growth and productivity.
I add my voice to that of those who express concern that the UK Labour Government is not now able to confirm the previous funding commitment of £8.3 billion for Great British Energy. I hope that that is not going to be another broken UK Labour Government promise. It is vital that we increase confidence among the business community, and it is disappointing that the Economy and Fair Work Committee heard further evidence yesterday of how the UK Labour Government’s tax rise is suppressing it.
Put simply, business investment is much less risk averse than Government investment, with every penny spent by Government scrutinised and every failed project criticised. That is not the case with entrepreneurs and innovators. The role of entrepreneurship cannot be overexaggerated, with businesses being the principal agents of change and growth.
As the late Thomas J Watson, the founder and chief executive officer of IBM, said:
“If you want to increase your success rate, double your failure rate.”
In other words, to drive innovation and business growth, business needs to be able to take appropriate risk. However, for businesses to take those risks to drive growth, there must be policy certainty. I have mentioned several times already this week the need for such certainty to allow for the future work that we all hope for in Grangemouth and the wider area. I am disappointed to hear reports today of further redundancy notices being issued at some of the Ineos companies.
The need for that policy certainty is also backed up by Scottish Renewables, which makes the general point in relation to clean power by 2030, alongside many other points, not least of which are the concerns around zonal pricing affecting investor confidence. It notes the comments of Alistair Phillips-Davies, Scottish and Southern Energy’s CEO, who stated that
“zonal pricing would be a political and economic disaster”.
That language is not usually used by such a senior business figure, and it correctly recognises concerns that are shared not just by the energy industry but by trade unions and major investors such as Sumitomo.
No speech of mine could be complete without my mentioning the role of women-led businesses, and I welcome the leadership that the Scottish Government and, in particular, the Deputy First Minister have shown in that regard. The policy and the money that is made available are a good step forward, but the challenge remains to ensure in particular that women-led businesses are at the heart of our focus as we move towards net zero.
Finally, I will make a few comments about skills. A major issue is the fashion in the UK and in Scotland for the past decades to emphasise competence-based training. That has downplayed the importance of knowledge, but knowledge is the key to new thinking and innovation. We need to benchmark our skills system against the very best internationally, rather than being too concerned with being in harmony with the rest of the UK.
We now move to closing speeches.
16:34
The Financial Times noted this week that the Labour Party has what it calls a “Meatloaf strategy” to rejoining the European Union—and I suspect that our Scottish Conservative colleagues share it—which is that it would do anything for growth, but it won’t do that.
I would like to pick up on some of the comments of Murdo Fraser and Alexander Stewart on the build-to-rent market. I want to put the issue in context and challenge them on what they said. Build to rent involves institutional funds purchasing sites and building them out to provide rental accommodation. In Europe and America, when such big institutional investors have acted as mega landlords, they have caused so many issues by buying up such large bits of property that the implementation of rent controls has been required.
At the moment, the build-to-rent market in Scotland is very small. Even with what is in the pipeline, it represents a fraction of the total housing market. It is a very niche part of the housing market in Scotland. Therefore, it seems like a sensible precaution to put in rent controls before the build-to-rent market takes off—it is like putting stable doors in place before buying a horse.
I want to pick Lorna Slater up on what she has said about build to rent. I see it very much as a professionalisation of the market. Surely she is not suggesting that she wants to return to a proliferation of a multitude of small landlords.
I would say that social rented housing, which is still a larger market in Scotland than the private rented market, is the priority here. We have covered this ground before. The right to buy gutted social housing in Scotland, and that is what we should be focused on. Rents in the private rented market must be fair for tenants, but that is a discussion that we can get into on another day, because I have only four minutes.
The green industrial strategy was discussed at yesterday’s meeting of the Economy and Fair Work Committee, which I attended, along with Mr Fraser and Mr Johnson. Last year, the Institute for Public Policy Research cautioned that the UK was missing out on the economic opportunities that were arising from the transition to net zero primarily because of the absence of a well-defined green industrial strategy. The same could be said for Scotland. Even the Deputy First Minister would acknowledge that the green industrial strategy that was published by the Scottish Government is more of a prospectus than a strategy.
At yesterday’s meeting of the Economy and Fair Work Committee, Tony Rodgers, the chief executive of Emtelle UK Ltd, a Scotland-based manufacturer of fibre optic cables and conduit, described passionately what is needed from an industrial strategy. We need to have actual targets for what should be manufactured in Scotland, how much of it and where, how many jobs would be created, how many sites there would be, what supply chain businesses would be involved and what skills pathways would be required.
It requires courage to set out a clear direction at that level of detail. There is risk. However, without a detailed strategy, Scotland is at risk of not having a direction at all and of investors not knowing when oil and gas will be phased out, what size we want the wind industry to be or how much of our energy should come from tidal, and how much of what is needed to build heat networks should be manufactured here.
Among the ways in which the Scottish Government could provide clarity would be by introducing an ambitious heat in buildings bill before the end of the current session of Parliament. That would give businesses that work in the field of heat networks, heat pumps, home and building insulation and heat storage batteries the confidence to invest and expand.
As Marie McNair did, I would like to highlight the importance of investment in ecosystem services, including nature restoration at a landscape scale. That is vital for the resilience of food production, the tourism economy and protecting the transport network from extreme weather, and it is of particular importance to rural communities, where it must be targeted towards creating employment opportunities and aiding local climate resilience, such as resistance to flooding and water shortages.
Nature restoration is the other side of the coin from emissions reductions. It is the only mechanism for carbon capture and storage that has been proven to work at scale, and it needs to play a key role in Scotland’s journey to net zero.
16:38
This has been a very interesting debate, which takes me back to my days at university, when I had the privilege to be taught economic history by a noted member of the Scottish National Party, Dr Duncan Ross.
Over the past century, the Scottish economy has faced long-term challenges. Fundamentally, it has been characterised by underinvestment, which has been and remains a chronic issue. I think back to an essay that I wrote on the Toothill report of 1961, which was commissioned by the Scottish Council for Development and Industry. The inquiry was run by John Toothill, who, at the time, was the managing director of Ferranti. That was a watershed moment for the Scottish economy, because the inquiry’s recommendations led to a realisation that Scotland’s faltering heavy industries should not be reinvested in. The inquiry committee wanted labour to be released from the heavy industries and reinvested in light industry, which would be developed largely through inward investment.
That was the first time that Scotland went in earnest for an explicit policy on inward investment, which at that time usually came from US multinational firms. Employment in US multinationals in Scotland peaked in 1974, when it stood at 92,000 employees. Of course, we know the longer-term story of silicon glen. It did not represent sticky investment; it was what the economist Turok described as dependent, and not developmental, investment. As we know, it led to a litany of firms closing throughout the 1990s, and a large reduction in Scotland’s industrial base in that decade.
We need to learn the right lessons from our engagement with inward investment over the past half century. It is encouraging that the Government has a mind towards how we can deepen the value chain in Scotland. I encourage it to further its ambition in that regard.
Investments that the Government has made in recent years can be characterised as reacting to crisis rather than being proactive in nature. I think of the example of McVitie’s, which was a Scottish company founded in Edinburgh and Glasgow and which ultimately became foreign owned by a Turkish company. A couple of years ago, it decided to withdraw the last remnant of that Scottish company from the country in which it had been founded, at the cost of nearly 500 jobs in a poor part of Glasgow. I do not condemn or criticise the cabinet secretary for her efforts in making a counter-proposal. However, it seems to me that the development agency should have been alive to the risks much earlier. It should have been able to work proactively with the firm to anchor that investment in Scotland if it had thought that the factory was at risk of closure in any restructuring round. That is just one example of many cases in which we could have been more proactive.
The Scottish Enterprise account management service does a great job—I used to be an account manager there myself—but perhaps it is not engaging with firms at the right level of decision making to ensure that we are ahead of issues when they emerge.
There are many other such examples. One accidental beneficial investment that the Government made in recent years concerned Prestwick airport. Although, ostensibly, that was done to rescue the passenger terminal service there, it turned the area into what we might call the Farnborough of Scotland, in that it is now largely recognised for its aerospace cluster. State ownership of such real estate assets is beneficial in the longer run. I encourage the Government to seek to develop that rather than dispose of it.
Several members made the fundamental point about there being insufficient investment. We need to find new ways of crowding that in, but we must do so in a way that does not introduce undue risks. The Bank of England has spoken about the risks of private equity investment, in highlighting that the lack of risk management of private equity can present longer-term risks. A number of Scottish companies have been delisted from the FTSE and have gone private. We do not really know what the longer-term implications of that might be. We have also seen Scotland not fully exploiting opportunities from unicorn companies, which have ended up in foreign ownership. Those are strategic weaknesses that the Scottish Government needs to address.
We need to consider other countries’ approaches to taking strategic equity investments and anchoring businesses to Scotland. A good example is Clansman Dynamics in East Kilbride, which is a high-end manufacturing company founded by Dick Philbrick in 1994. The business is built as a workers’ co-operative, so it is not possible to sell shares in it to a speculative owner. Dick’s concept of ownership was rooted in the idea that the business would be anchored in this country and would be a high-value firm that would develop and grow its business here organically. He did not want it to disappear into General Electric, Philips or Siemens—he wanted to keep it as a Scottish business. Indeed, it is a huge success. It is more productive than its peer firms, does most of its work in exports, and has high levels of engagement with its staff, who are engaged in every aspect of the business’s decision making. It is a wonderful example of what we could do more of in Scotland, by emulating the Mondragon co-operative structures that are prevalent in Spain.
A multitude of opportunities exists in Scotland, but the fundamental issue is how we can leverage investment for long-term value creation. I encourage the Government to look more broadly at other models and explore pockets of excellence where that can be achieved. I would hate to see us repeat the mistakes of half a century ago, when we overrelied on fluid capital investments from other countries that were not fully anchored here. We still have weaknesses in that regard. Some major firms that are not fully anchored in Scotland might be at risk of removal in any round of asset restructuring in those businesses. We must consider how we can approach that more effectively so that we do not see ourselves again having to react to corporate closures and then losing out.
16:44
I start by reminding members of my entry in the register of members’ interests regarding property.
I am pleased to close the debate on behalf of the Scottish Conservatives. The cabinet secretary and SNP members have claimed throughout the debate that Scotland is open for business and investment. However, as already extensively stated by my Scottish Conservative colleagues, Scotland under the Scottish National Party is indeed not open for business. Even though, for foreign direct investment in the UK, Scotland is second to London and is the home of emerging sectors such as renewables technology and life sciences, Scottish industry remains concerned that the SNP Government’s anti-business policies, along with the higher income tax rates, will deter investment.
My colleague Alexander Stewart said that the Scottish Financial Enterprise chief executive, Sandy Begbie, highlighted that cutting taxes to at least the same rates as those in the rest of the UK could lead to greater investment and a larger tax base. My colleague Murdo Fraser spoke about the importance of ferries to the growth of the whisky industry, and said that the reliability of the ferry service and the roads linking one place to another are critical for transport. My colleague Sue Webber is absolutely right that investment is linked to the availability of skilled labour, and that the SNP has managed to make Scotland a less attractive place for skilled workers, with its income tax rates being the highest in the UK. It is in the Scottish Government’s gift to make a change to address all those issues. The cabinet secretary mentioned a step change, and I hope that those issues and that step change are included in her closing speech.
Last week, we had the privilege of meeting Fiona Campbell from the Association of Scotland’s Self-Caterers. She spoke extensively about the damage that will be done by the SNP Government’s short-term-let licensing scheme and the visitor levy. Those ridiculous regulations place a burden on small businesses by turning them into tax collectors, with business owners having to do all the work. The smallest mistake could lead to those small businesses breaking the law, resulting in small business owners being fined for unclear Scottish Government regulations. Those absurd regulations have made investment in Scotland extremely difficult. Is that really how we should treat our job creators?
Let me turn to jobs. The SNP’s failure to pass down business rates relief will be the death knell for many businesses, while costs for businesses that are lucky enough to survive mean that it will be more difficult for them to employ people. The SNP’s damaging high-income tax regime has cost the economy £800 million, because the Scottish tax base has grown at a slower rate than the tax base of the rest of the United Kingdom. A faster-growing economy could raise tax revenues and go a long way in funding better public services and strengthening the economy.
Members of the Government might be congratulating themselves, but it is high time for us to teach the SNP a lesson or two about how growth is created. Wealth and economic growth do not come from Governments—they come from businesses. Nevertheless, businesses need the proper levers and environment to thrive. No surprise here—nothing changes—that the SNP Government has failed on many levers. It has failed on transport, energy, housing, a skilled workforce and taxation—the list goes on and on. Disappointingly, all those failures by the SNP have stifled growth, but here is a newsflash: not only the SNP is to blame.
Members: Oh!
Let us hear Ms Gosal.
Confidence among the UK’s small businesses has fallen to its lowest level since the height of the pandemic. In fact, let us not forget that the small business index hit its lowest point since the pandemic in the October to December quarter, dropping by 40 points, but what occurred during that time? Yes—the UK Labour Government budget occurred. That shameful increase in employer national insurance contributions has put businesses in a difficult position, with many having to cut jobs.
There were great contributions from all members. I cannot, unfortunately, mention them all, because I want to touch on something that Kenneth Gibson said about India, but I will briefly talk about some members’ speeches.
From the Labour seats, Daniel Johnson talks about the need to focus on investments into Scotland and maintaining prosperity for Scots. That is rich coming from those benches, especially since it was Labour that raised national insurance—I am not sure that Scots or businesses think that that is prosperous. The future may very well be green, but Lorna Slater forgets that her failed deposit return scheme caused panic among job-creating and tax-generating companies in Scotland. Therefore, the Conservatives will certainly not be taking any lectures from the Greens. I agree with Willie Rennie—
Members: Oh!
I agree with him on two points: caution on regulations and taxes, and long-term consistency and certainty. [Interruption.]
Let us hear Ms Gosal.
I want to end by talking about something important that is happening next week that I think that all members will celebrate. Last year, as the founder and convener of the cross-party group on India, I led a delegation of MSPs to India. As a result, next week a memorandum of understanding between Scottish Financial Enterprise and the Federation of Indian Chambers of Commerce and Industry will be signed. The purpose of the MOU is to facilitate meaningful partnership between fintech organisations of India and Scotland to collaborate on mutual interests, which I hope will bring more investment into Scotland.
Presiding Officer, since today’s debate is about increasing investment, please allow me to say this: I have to mention that the very first annual India and Scotland event organised by the Indian consulate will be held in Edinburgh next week. I am very proud to announce that. Kenneth Gibson talked about touching on successes, and the cabinet secretary will be speaking at the event next week. I really hope that the cabinet secretary and the Scottish Government will forge and gel those relationships so that they can grow and so that we can bring success to Scotland.
I call the Deputy First Minister to wind up and take us to 5 pm, please.
16:51
It is a great source of comfort to me that the years of the Tories’ doom and gloom do not seem to have stopped investors. According to EY’s annual independent analysis of inward investment, last year Scotland experienced an increase of 12.7 per cent in the number of FDI projects and had double the rate of growth of the UK, when compared with 2022. Our share of UK FDI projects increased for the fifth year in a row, to 14.4 per cent. Investor perception of Scotland also improved, with 26 per cent of the potential investors that were surveyed saying that they were planning to invest in Scotland—up from 19.2 per cent.
I know that things need to be political, but what Willie Rennie said is the bottom line: investors look for signals, and I think that the signal that the Parliament should send, irrespective of the minor disagreements that we might have, is that Scotland is open for business, that the potential of our economy and our people is huge, that we are operating in a global environment and that we intend to compete to win investment.
Alexander Stewart said—I absolutely agree—that Scotland has the potential to lead the UK. In many respects, we already do. However, our potential and our ambition to realise that spur me on. I am treating this challenge and opportunity by taking the practical approach of recognising that we must have a strategy to get there. I take on board Lorna Slater’s point about the need for that strategy to be as granular as possible, so we are actively engaged in that work. Ultimately, for the potential that we know exists and the strategy to get there, we need to create the building blocks and ensure that we take people with us. My invitation to everybody is to get involved with that work.
I want to touch on some other things that members mentioned. Murdo Fraser talked about the need for a supportive environment and said that investment will come when there is a positive environment. That is true. We did not hear huge amounts of positivity from him, but I agree with that line.
There are three points to make in that regard. One is about regulation: I recognise the need to work on a pan-Government basis on that and not just within the economy team, so that is what we are doing. We have established a Cabinet sub-group, bringing together all the cabinet secretaries to look at what is happening in each part of Government that affects the economy, which helps us to have open conversations.
Secondly, Daniel Johnson asked a question about consenting. Over the past few weeks, we have massively increased the number of workers in the consenting unit. Gillian Martin will keep me right, but I want to say that we have doubled the number of workers in order to reduce the amount of time that it takes to give consent.
Murdo Fraser talked about planning. I want to distinguish between planning and consenting, which is an important distinction to make. The figure that he quoted is distorted by about 40 planning applications, and the average is much lower.
I welcome what the Deputy First Minister is saying. The cross-Government point is very important. The other point that keeps coming up in the Economy and Fair Work Committee concerns international comparisons. If it takes three to five years for a wind project to go through in Norway, we cannot afford for them to take 10 to 15 years in this country. Does she accept the point that we need to be mindful of international comparators?
We accept that. Developers tell me that they are juggling a number of key milestones. One is planning, one is the contracts for difference scheme, one is grid connections and there are others, including investment decisions.
We have committed to trying to provide maximum certainty on the things that we can control. On the consenting point, as we have outlined, our target is to get applications through in 50 weeks. Members will appreciate just how complex the applications are. They are huge projects, but we will try to provide certainty.
I have been jumping around my notes, which I have now ditched.
The other fundamental point that we face, even when we get developments through, is the big question that Lorna Slater posed, which was about how we ensure that our great wind and renewables potential is creating jobs in Scotland. The supply chain needs to know that it will have customers: people in the supply chain are waiting for investment by the developers before they make their investment choices. However, when developers are deciding where to invest, they are looking for the supply chain to be already established and ready to deliver. It is a bit of a chicken-and-egg situation. [Interruption.]
Deputy First Minister, if I may interrupt—I am aware of colleagues who are coming into the chamber just now. I would be grateful if, as a matter of courtesy, conversations could be curtailed.
I may have somewhat trivialised the issue in saying that, but I have outlined why we need to de-risk investments up front. Some people will ask why we put public investment into private enterprise: the reason why is that investments need to be made now, so that the supply chain exists when developments get consent and building starts.
The point that the Deputy First Minister makes about demand signals is key, and it does not relate only to renewables: shipbuilding is a classic example of an area where such investment must be made. In that regard, Mr Rennie talked about the steel industry in Scotland and the fact that key assets are currently hanging by a thread. A huge opportunity lies in green steel and electric arc furnaces. Could the Government take a more proactive approach to developing those assets?
Yes, is the bottom line. We want to take advantage of all the opportunities that come from supporting manufacturing and the supply chain, especially in terms of renewables or shipbuilding, which Mr Sweeney mentioned. If things go as we want them to go, we will have a huge surplus of energy, so how we deploy that in attracting investment will be critical.
I cannot remember how much time you gave me, Presiding Officer, but I think that I am nearing the end of it.
You have until 5 pm.
I had many things to say in response to other members, but they will forgive me if I do not go through everything that was said.
I want to make the points that our history has demonstrated that key economic interventions can change the future of a nation, and that backing key industries and introducing new opportunities can totally transform communities. Right now, I argue that the opportunity that we face as a country outstrips anything that has gone before.
We have more than 40GW of offshore wind energy in the pipeline. When we look at what is happening in other nations, we can see that we have an early-mover advantage. So that we use that, we need to support the supply chain in order to secure Scotland-located jobs. Paul Sweeney talked about the need to ensure that that is the case: nothing is more critically important than having the supply chain located in Scotland. If we look at where people are interested in investing right now, we can see that the jobs are very difficult to move away from the country in which they are situated.
We are on the cusp of a huge opportunity. We need to amplify our message to the world that we are open for business, that we welcome external investment and that Scotland will compete to win the market.
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Decision Time