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It is a situation—I would perhaps not call it market failure—with different players who are all, rightly, looking at things from their own perspectives. When we consider the whole system, however, with everybody in the room talking about the different moving parts, we can broker solutions that would otherwise not happen. If someone is looking to move goods, they cannot mess about with them and take risks, as they could lose their market. Cost is an issue, reliability is an issue and frequency is an issue. What happens if something goes wrong is an issue. If someone can get goods on a truck to Dover, if there is a ferry every half an hour or whatever and if they can get another truck when they need one, they have flexibility—notwithstanding the capacity constraints that we have talked about. At a Scottish port, there might be one ferry once a week, and if it does not go and people have to wait another week, they have a problem. The issues are multifaceted; it is not just about cost.

We are considering different commodities and routes where it makes sense to consider what the cost gap is, whether it is bridgeable and whether there is resilience that we can build in. If we could move forward a couple of notches on all those things, we could perhaps be in a position where operators and businesses can consider being part of that, consolidating loads among different producers and so on.

All of that is on the table, and hopefully we will make some progress there. In the environment that we are in, the Irish example gives fresh impetus.

That balance is hugely important, but business can rest assured that we are absolutely focused on transport connectivity. Where that requires roads to be upgraded, it will happen. The agreement with the Greens has been structured in a way that allows that to happen, taking account of the imperative to move towards reducing car miles and facilitating modal shift in transport. However, as Minister for Business, Trade, Tourism and Enterprise, I am hugely focused on ensuring that it continues to happen.

Good morning, and thank you for inviting us to join you.

As the committee knows, Scotland is part of a global economy. International trade is an important mechanism through which we can enhance our place in the world and build diversity in our supply chains. Recent events, including Brexit, Covid, the blockage in the Suez canal and other challenges, have exposed vulnerabilities in our supply chains. Scotland’s remote communities, in particular, often suffer disproportionately through being at the end of long supply chains or requiring smaller volumes of products.

This has been a challenging time for many businesses, but we have also witnessed tremendous resilience and ingenuity. Supply chain shortages have accelerated change, created new opportunities for some Scottish firms and prompted innovative solutions. Perhaps the clearest example was the sourcing of vital national health service supplies such as personal protective equipment throughout the pandemic.

We witnessed companies diversifying from producing whisky to producing hand sanitiser, electronics firms repurposing production lines and subsea specialists turning to making ventilators in previously unimaginable timescales. Pre-pandemic, all our PPE was sourced from abroad; now, with the exception of gloves, the vast majority of it is manufactured here in Scotland.

Some firms have gone on to develop innovative new products that are being sold to the rest of the world. Alpha Solway, for example, a Dumfries-based company, recently developed a transparent mask that is one of only a handful of such masks that are United Kingdom approved and available on the market today. Demand for that product has extended overseas, with recent orders having been placed for millions of those masks by clients in the European Union, and additional opportunities are emerging.

We will continue to maximise supply chain opportunities for public sector procurement, and our investment in economic assets such as the National Manufacturing Institute Scotland, innovations centres, the Scottish manufacturing advisory service and others will support manufacturers to adapt to changes and constraints in the supply of materials and components. In addition, I have a programme of work on-going with port and airport operators and others to determine the scope for Scotland to export more of our products directly, thus increasing resilience and reducing our carbon footprint.

In its sessions so far, the committee has highlighted that the labour market has tightened and vacancies have increased. We are working with business organisations to develop our working with businesses action plan, which is focused on employability skills and fair work principles, to identify actions to mitigate the impact of labour shortages. We are investing more than £1 billion this year to drive forward our national ambition for jobs and an additional £500 million in this session of Parliament to support new jobs and to reskill people for the good, fair and green jobs of the future. We continue to call on the United Kingdom Government to make changes to the immigration system to combat shortages of skills and labour following the exit from the European Union.

Our new 10-year national strategy for economic transformation will focus on developing the skills that Scotland’s future workforce needs and on maximising the use of Scotland-manufactured components in areas of new market opportunity.

Robust and resilient supply chains are the bedrock of a thriving economy. We must take every opportunity to strengthen Scotland’s supply chains.

I look forward to our discussion.

We continue to press the UK Government to change the rules, but, obviously, it is a reserved area. We can do what we have done with regard to PPE and other things, which I mentioned earlier. We continue to do a lot of work through our supply chain development programmes and other activities, to look for opportunities to manufacture more products in Scotland in order to create economic opportunities here and build resilience. That is the primary lever that we have to tackle the issue.

Of course, clearly, there are many things that we cannot manufacture here competitively. We can manufacture many things in Scotland, but not everything. Increasing manufacturing here is part of the answer, but it is not the whole answer.

There is a gap, but the gap is not as big as you are making out. From memory, in terms of labour market inactivity, we are at 22 per cent and the rest of the UK is at 21 per cent. There are differences, but they are not hugely significant.

In response to an earlier question, I focused on understanding the make-up of the 750,000 people who are not in the labour market. Some of them are in that situation for good reasons: they are in education, they suffer from ill health or they are taking care of their families. However, we need to understand what we can do at the margins to reduce that total number. Obviously, if even 100,000 of those people—to pick a number at random—were back in the labour market, that would be helpful in the situation in which we find ourselves.

For every part of that cohort, there will be a different answer. For parents who are returning to work after having children, childcare provision will be important, so the increase in free childcare hours is hugely important. In rural areas and in some parts of cities, there are issues around transport and access to economic opportunities. Again, the Government is hugely focused on addressing those. For people who have ill health, there might be opportunities for some to access training and support that will enable them to become part of the labour market, which is great for them and for the economy.

One of the interesting differences between Scotland and the rest of the UK is in the number of students in the labour market inactivity pool. We are exploring that further so that we can understand the issues. However, that is a double-edged sword, because we have to ask whether we want students in the labour market when they should be more focused on their studies. There is a balance to be struck.

We are increasingly deeply involved in understanding those issues and driving forward programmes to address each of them separately, because the answers for each cohort are different.

Yes, that is a concern and I know you have taken evidence that has covered some of these issues already from COSLA and others, who will be closer to some of the practicalities of this. From a Government and Government agency point of view, we are in a position where we can access legal advice and we can take a view on things. We are typically talking about larger sums of money, bigger investments and so on. It makes the process more complicated, more difficult, more challenging and more uncertain, and, for smaller organisations that are dealing with the issues and trying to support economic development locally, those challenges are multiplied. It is too early to see examples of the impacts that you mention, but I have concerns the situation that you outline may well be the case.

On the second part of your question, which concerned what we can do about it, clearly, we will continue to challenge the UK Government on these issues, but we are open to having conversations about the specific organisations that may find themselves in that situation and how we could work with them to help them navigate the uncertainties that exist as part of this process.

We continue to push for amendments to the bill in the later stages. At the end of the day, it is a UK bill and the UK Government will take it through Westminster as it sees fit.

We will continue to make the case, argue for those amendments and work with others of a similar view to make changes where we can. However, as I said, the bill will progress through Westminster based on what the UK Government decides it wants to include. It is of concern that the amendments have not been taken on board, which is one reason why we are not recommending that consent be given to the bill.

No. Thank you very much for the questions. We have covered all the issues that we wanted to raise, and it is good to get the committee’s perspective on the issues.

Yes, we are very conscious of that. I know that the Cabinet Secretary for Finance and the Economy was with you earlier and that you spoke about the guidance and so on. Those issues are very much to the fore in terms of how we support local economic development. It is a priority for the Government and for me.

The issue will be the chilling effect. Risk aversion is part of the issue. We need to be open and clear with those in Scotland who may find themselves in that position. They may look at something and think that it is too difficult and that they do not want to take those risks.

For us to understand examples of that, it is important that they are brought to our attention. We are open to having those conversations and to looking for examples with local authorities and others of where that may be a risk so that we are aware of it and are able to work with those who might be affected and can help them navigate the process as necessary.

Thank you, convener, and good morning. I thank the committee for the opportunity to set out the views of the Scottish ministers on the proposed legislation. I look forward to taking questions. Before that, I will make a few brief remarks to outline my key concerns.

My first concern relates to the case-specific sweeping powers of the secretary of state to ignore the devolution settlement, and to the risk of UK ministers intervening in devolved areas without proper consultation or knowledge of local circumstances.

Secondly, the absence of formal regulatory and enforcement arrangements could undermine confidence in the process, and it could hinder the ability of grant-awarding bodies to make awards to recipients as they have done previously.

My third concern relates to the inclusion of agriculture in the provision. We believe that it should not be included for many good reasons.

My fourth concern relates to the time periods involved, particularly the fact that interested parties will have only one month to appeal any decisions.

Lastly, much of the provision remains unclear, even at this stage, due to the absence of draft subordinate legislation and detailed guidance. Notwithstanding the concerns of principle, the absence of such detail makes it difficult to take a considered view and give consent.

That is a brief outline of my concerns. I look forward to taking questions from the committee.