Y First Item of Business is portfolio questions. We start with question number one from Annie Wells. To ask the Scottish Government how it measures economic performance. Cabinet Secretary, Keith Brown. The Scottish Government uses the national performance framework and Scotland performance to help monitor and assess Scotland's overall economic performance. Those contain indicators that assess Scotland's performance across a number of dimensions, ..economic growth, productivity and participation in the labour market. The Scottish Government is committed to improving Scotland's economic performance... ..and Scotland's economic strategy sets out our framework for doing so. It's based on the twin objectives of boosting competitiveness whilst tackling inequality. In its later ScotLand performance document published alongside the draft budget, the Scottish Government was found to be stagnating or actually getting worse in 46 out of the 67 key indicators... gyn diffnog o'r charnau aelod oedd y namag oedd dros alunol i gyrnoddau i bobl helaiannau i bedhau deuaith. It's nice to hear the Conservatives talking so positively about Scotland's economy as always. I know, I also could have pointed out that the employment rate of 73.6 per cent for quarter three 2016 is the second highest across all UK countries. I could have pointed out that the total income received by Scottish households increased over this period. The The ratio of income to the top 10 per cent, compared to the bottom 40 per cent increased from 112 to 115. I could have pointed out that the gender pay gap was 6.2 per cent, a decrease of 1.48 per cent, or even that the value of Scottish exports had increased by 3.6 per cent in 2014. That is an increase of 4.4 per cent in relation to exports to the rest of the UK, and also 4.4 per cent yma i unrhyw ychydig o'r yr eustafellogau neu 3.4 per cent yw ei ddigwyd hwn. Those are very positive measures. Power measures are another of course there are measures that I acknowledge are challenging but it is only fair to recognise two important facts. One that there are positive measures here and secondly there is another government active in the economy in Scotland. Owe, we have heard for a long time from the Conservatives, oh we are getting new power saying must Jesus, the UK government had those powers before, wrth gwrs, what did they do with them? Jackie June Lee I will focus on one target that the Scottish Government has adopted. One is that productivity should move from the third quartile to the first quartile by 2017 compared to other OECD countries. I understand that that target has been missed. We remain in the third quartile and have fallen from 18th to 19th place. Why has the Scottish Government failed to meet that target? That is perfectly true, as Jackie Baillie says, that we have remained in the third quarter, not gone into the first quarter. I have mentioned that a number of times in this chamber, not least in relation to the review that we are currently conducting in terms of our enterprise and skills organisations. However, it would have been useful had Jackie Baillie acknowledged that there has been a 4.4 per cent increase in productivity in Scotland. There has been none whatsoever in the rest of the UK. It is not good enough and what we have to do in that circumstance is look at what we are currently doing, which is exactly what we are doing in terms of the review of enterprise and skills agencies, but also in relation to the £500 million Scottish gross scheme, which will help to drive increased productivity, competitiveness and internationalisation. Question 2, Ben Macpherson. To ask the Scottish Government what action it is taking to assist marine energy developers. Mr Paul, we'll house. The Scottish Government and its enterprise agencies continue to offer significant support to the marine energy sector in Scotland. The Renewable Investment Fund and Wave Energy Scotland initiatives alone have so far provided £57 million to wave and tidal projects. The decision by the UK Government in November 2016 that it would not be providing ring fence support for wave and tidal technologies in the second contracts for difference allocation round came as a blow to many marine energy developers. Following the announcement, I convened a round table discussion with industry representatives and UK Government officials to understand industry priorities. I reiterated the Scottish Government's strong commitment to the development of a successful marine energy industry and to maintaining our current global lead. The Scottish ministers will continue to use the powers that we have to support the growth of the sector, and we are willing to work with the UK Government and industry to explore possible solutions. I proposed that Scotland hosts a new working group to replace the UK Government's defunct marine energy programme board in order to find a way forward. Work is currently under way to agree the remit membership in terms of reference of that new group. Ben Macpherson, I thank the minister for that answer and share his concerns about the UK Government's CFD allocations. The minister is aware of NOVA innovation in my constituency, and I wonder if the minister could update me on what assistance the Scottish Government is providing to find a site for the deployment of NOVA innovation's next phase of world-leading tidal energy devices, which will provide numerous employment opportunities as well as significantly contribute towards a low-carbon economy by 2050. I recognise that NOVA innovation is a very forward-thinking company that has done excellent work of late and has had a very successful year. I understand the technical parameters of the site that NOVA innovation is looking for, and I will go into detail on the commercial confidentiality. However, there is an enhanced account team approach that is being used to engage with NOVA innovation, pulling together SE company growth, Reef, Highlands Islands Enterprise and Waters team perspectives. There is a proposal by SE and HI to review all available sites in Scotland that can accommodate wave-entitled projects up to 2022, to include currently-owned sites and potential smaller-scale community sites. A meeting was arranged with officials to discuss us with the Crown Estate on 1 February, but due to illness to one of those who was due to attend, this is now going to take place next Monday, 13 February. Scottish Enterprise lost more than £30 million of public funding when two wave-power companies went into liquidation. What steps is the SNP Government taking to ensure that lessons are learned from this and that investment in wave-power delivers good value for money? I do think that it is somewhat rich of Morsegoal, and I recognise his genuine interest in his issues. I would say to him very gently that the UK Government is responsible for some of the parlous conditions that the wave energy sector has faced in Scotland. If he is sincere about his wishes—I believe that he is—he needs to make representations to the UK ministers, to Greg Clark, to follow up the Scottish Government's lead on this, in urging Mr Clark to provide a route to market and sincere support for a wave-entitled energy sector. It is only the Scottish Government that is stepping in to help this industry at the moment. The UK Government is doing next to nothing to support a vital industry for our islands. Liam McArthur I echo much of the sentiment that the minister expressed there. In relation to supporting innovation, there has been any progress in discussions with the UK Government about setting a CFD pot for innovation, including wave-entitled, but perhaps other storage technologies that I think could benefit from that sort of support at this critical time. I certainly thank Liam McArthur for his question. I know that he has a very strong and longstanding interest in this issue, which affects his constituency very severely. I would say that we are in continued dialogue with Bays and UK Government ministers on that issue. We are going to look to see if there are any opportunities arising out of the UK industrial strategy to see, given one of the challenge pots that relates to energy projects. We clearly see that the centres of excellence, such as EMEC, are world-leading, and therefore we would hope that UK Government ministers will support a strong bid from the Scottish industry for funding for innovation in the sector. We live in hope that we will see some form of support for wave-entitled technologies going forward, but that will depend, of course, on the decisions that are made by UK ministers. Bill Bowman, to ask the Scottish Government what support it can offer the employees of NCR and Dundee who are facing potential redundancy. I understand NCR as commenced consultation with its employees regarding the company's future restructuring plans. We have contacted NCR to offer support for any employees who may be facing redundancy through our partnership action for continuing employment or PACE initiative. The company has stated that it will make contact to discuss PACE support, depending on the outcome of the consultation. I would not want to prejudge, of course, that consultation. Through providing skills development and employability support, PACE aims to minimise the time individuals affected by redundancy are out of work. PACE has an excellent record in achieving positive outcomes for those affected by redundancy. Scottish Enterprise, as the member would expect, stands ready to work with NCR management to safeguard employment at the Dundee site. I thank the cabinet secretary for that answer. Over the last few weeks, news of other redundancies and relocations in Dundee have been reported. It is a worrying time for those concerned. What support can the Scottish Government offer the city of Dundee to help to boost job creation following yesterday's news that the city has the lowest employment rate of any city in the UK? Companies such as NCR and others such as Tokheim and Duddy and Michelin have been real success stories for the city. We have, of course, been providing funding support through the account management process that we have with Scottish Enterprise, with key employers in Dundee to make sure that we have targeted help for companies as they grow or try to take on new market challenges. I assure the member and others who have an interest in the economy of Dundee that the Scottish Government is very sincere about providing support to key employers in that area. Of course, whether it is skills support or support for export development of the kind that the cabinet secretary outlined in his earlier answer around the Scottish growth scheme, we are always looking to try and support companies in the local economy like Dundee to succeed and thrive. However, it takes these matters very seriously and, of course, if there are examples that do arise, pace and other wider Scottish government family of enterprise and skills agencies are there to intervene and help. 4. Graham Day Thank you. To ask the Scottish Government how Angus will benefit from the Taycities deal. First of all, I would like to say how delighted I am at the strategic partnership working across the four councils, which is clearly reflected in the Taycities region deal proposal. Just last week, I had the opportunity to meet the chief executive of Angus Council and others to hear first hand about their emerging city region deal proposals. I also had the pleasure of hearing how Angus sees their role in contributing to and benefiting from sustainable, inclusive economic growth through this collaborative approach. 5. Graham Day Thank the cabinet secretary for that answer. He will be aware of proposals within the city deal to establish an east of Scotland hub of the National Manufacturing Institute of Scotland in Arbroath. The aim of this is to increase investment and innovation, encourage greater internationalisation of Angus and Taycities engineering and advanced manufacturing sector, upscale the existing workforce, and create more apprenticeships. The cabinet secretary would agree with me that the potential to give the town and the wider region a significant economic boost that is worthy of pursuing. I think that there were some very interesting proposals, not least in terms of the life sciences relationship with Dundee University, the success that they have had there and other interests in Angus. In relation to the proposals generally, they are very much in harmony with the developing proposals for the National Manufacturing Institute for Scotland. It is a significant proposal in MIS with the potential to support step changes in the efficiency and productivity of Scotland's manufacturing sector. However, decisions on its establishment and location will depend on the business case, which will be published later this year, and wherever the constituent parts of the institute are located, we are determined that it will be for the benefit of the whole of Scotland. 6. Jenny Gilruth Thank you, Presiding Officer. To ask the Scottish Government how Midfaith and Glenrothes will benefit from the Tay and the Edinburgh city deals, respectively. Jenny Gilruth's question highlights a very unusual point in as far as Fife Council, of course, are partners in two different potential city deals. We have been very clear that they are welcome regional partners working together on long-term strategic proposals, which seek to deliver inclusive economic growth. For Midfaith and Glenrothes, it is natural that they should look both to Edinburgh and to Dundee as major centres of employment. We are very comfortable to see Fife working as part of both those city regions as proposals are developed. To ask the Scottish Government what its response is to the recently published report Export Statistics Scotland 2015. The Scottish Government very much welcomes the latest export figures for Scotland. They show that, despite challenging times for the global economy and excluding oil and gas, our total international exports increased by £1 billion in one year. We are working with our partners to deliver Scotland's trade and investment strategy in order to further improve our exporting performance and to ensure that we are seen to be an outward-facing nation that is open for business. Anas Sarwar, I think that the minister accepts and welcomes the findings of the Export Statistics Scotland, which also finds that 63 per cent of Scotland's exports go to the rest of the United Kingdom, and 16 per cent of Scotland's exports go to other parts of the European Union. Can the minister therefore explain his economic incoherence on why he believes that a reaction to leaving the EU single market is to have another referendum and attempt to leave the biggest and most important market for Scotland, which is the United Kingdom, which is four times the size? Does not this expose that it is not economic coherence that the minister is looking for, but is grudge, grievance and leaving the United Kingdom? I thank the applause from the Conservative benches for telling their own story. Yesterday, we saw political incoherence. As far as the Labour Party had three of its members voting for that withdrawal from the EU market, I do not know why Anas Sarwar wants to support that withdrawal from the EU market. We do not believe that we should withdraw from the EU market. We think that it is an extremely important market, eight times the size of the UK market, but we also believe that we should continue and expand our growth with the rest of the UK. Interestingly, for the rest of the UK, of course, the export more into Scotland than we do to the rest of the UK is an extremely important market. It is only a fool that we want to see that made as a choice. We think that we should continue to export to both. We should increase our exports. Our efforts are, as I mentioned in response to Jackie Baillie's question, designed towards achieving further exports. What the motivation is for somebody to promote or talk up a trade war between Scotland and the UK, I will leave to the economic incoherence of Anas Sarwar. We want to trade with everybody and do more of it. Ivan McKee I remind the chamber of my role as a parliamentary liaison officer to the cabinet secretary for the economy. For Scotland's economy to thrive and prosper, we need to grow exports to all our markets. Anyone who presents a false choice between exporting to the UK market is an alternative to the EU market fails to understand business or politics and does a great does service to Scottish business through the lack of ambition for our economy. Does the cabinet secretary agree with me that the proposals contained in Scottish Government's document, Scotland's place in Europe, enables Scotland to continue to trade with the UK and the EU single market on the same terms as today and offers businesses in the rest of the UK the opportunity to trade with the EU on favourable terms by basing themselves in Scotland? A win-win for all concerned. If the cabinet secretary heard the question. Can I say first of all that it is really refreshing to hear members diligently record their interests when they are speaking, a lesson that could be learned by others in this chamber as well? I would also reject any suggestion, as Ivan McKee's question does, any suggestion that Scotland should face a choice between trading with the rest of the UK. I mean the preposterous nature of the Conservative position, which is we want to trade more with everybody, but in certain circumstances we are not going to trade with Scotland. A nonsense that the Labour Party unfortunately has bought into, an absolute nonsense, there is no reason why Scotland should not increase its exports as it has been doing, a 4.4 per cent increase in relation to the rest of the UK, the same increase into the rest of the EU. You think that they would want to recommend and welcome that, but instead what we have got the same old thing talking Scotland down, we will continue to promote Scotland and to increase exports, and they can talk Scotland down. In yesterday's debate, the Scottish Government told us that there will be a hard Brexit resulting in a customs border between the UK and the EU. If that is true, what side of that customs border does Mr Brown want Scotland to be on? Does he want to be on the UK domestic market side, which accounts for two thirds of our domestic trade, or on the European side, which accounts for 16 per cent of our exports? He cannot have both, based on his own analysis of there being a customs border, he cannot have both, and based on the feedback from EU, senior officials of the EU, he cannot have both. Which one is it? Can I suggest that, if that is the message of the Conservative party, you cannot have both? Could you at least be honest with the people of Ireland and Northern Ireland? That is not what you are saying to them. You are saying explicitly, you are saying that you cannot have both. What is so different about the island of Ireland and Northern Ireland about Scotland? Of course, it is the case that we cannot have both. We would prefer, of course, and we have said this. We think that the UK should stay in a single market. If they do not want to do that, that has to be their decision. We want to stay in a single market. It is only the Tories that are talking about erecting borders. Theresa May herself has said, we want to buy your goods, we want to sell you ours, we want to trade with you as freely as possible and work with one another to make sure that we are all safer, more secure and more prosperous. The Scottish Government is looking after the interests of the people of Scotland in doing that, and I suggest that the Scottish Tories could learn a lesson and do the same thing as well. To ask the Scottish Government what its response is to the economy jobs and fair work committees report on the economic impact of leaving the EU. The Scottish Government welcomes the committee's report on the economic impact of leaving the EU. In particular, it notes its recommendations and conclusions. We have been clear about the risks that Brexit poses to the economy. That is why, in recent months, we have announced steps to invest an additional £100 million in capital projects in this financial year to help to stimulate growth. We are also establishing a new £500 million Scottish growth scheme to support in particular small and medium enterprises and taking forward a range of measures through the budget. The Scottish Government has always been clear that remaining in Europe is the best option for our future. In December, we published a detailed set of proposals in Scotland's place in Europe, our plan for dealing with the consequences of Brexit. That plan outlines our proposal that, first and foremost, the UK Government should negotiate for the UK as a whole to retain single market membership, but that if the UK Government will not do that, as indeed the Prime Minister has indicated, we urge the UK Government to put forward a differentiated approach so that Scotland can stay within the EU. John Mason, for that answer. I wonder if the cabinet secretary noticed in the report the concern of the committee reflecting a lot of witnesses that we had about the danger if EU workers are not any longer able to come and work. We, in fact, heard from a walker's shortbread, Angus soft fruits, denim seafoods, Scottish leather groups, Scottish engineering, Scottish care, all of whom were concerned about not having workers from the EU. Yes, I am very concerned about that. I would suggest that there are other sectors in addition to those that John Mason has mentioned. I had a meeting earlier on today with a number of substantial insurance companies very concerned about that. Of course, the higher education sector is very concerned. The 181,000 EU citizens who have chosen to make their home in Scotland enrich our culture but also strengthen our society and boost our economy. As the committee's report makes clear, those workers make a vital contribution across a range of sectors. That is why the Scottish Government is exploring all possible avenues for Scotland to retain the benefits of EU membership. For which Scotland voted, the Scottish Parliament's European and External Affairs Committee has also noted the important contribution of EU migrants to Scotland and has called for Scotland to be allowed its own separate immigration deal after Brexit. At the very least, can the UK Government, the Conservative Party in this place, not a least say that all EU citizens in Scotland should be given the guarantee that their place in Scotland is secure? When he gave evidence to the committee, the cabinet secretary said, we have responded to the situation but we have not changed the economic strategy. The committee's unanimous finding in Para 147 of the report is that, in light of the evidence heard on the changing economic landscape following the decision to leave the EU, we recommend that the Scottish Government's economic strategy should be reviewed, so will he now institute a review of his Government's economic strategy? What Richard Leonard neglects to mention, which I also said at the committee, is the actions that we take and the initiatives that we are involved in have to respond to the changing circumstance. An economic strategy that seeks to promote inclusive and sustainable growth is the right one for Scotland. Of course, that was examined during the course of the enterprise and skills review, so of course, as we are doing in terms of doubling the number of SDI representatives across the EU, increasing the number of offices that we have, increasing the trade promotion activity that we do, not least through the establishment of a border trade, of course we will respond differently to the circumstances, but the economic strategy is the right one. We move now to finance and constitution questions. To ask the Scottish Government what action it will take to support businesses that will see their non-domestic rates bills rise increase from April 2017. The Scottish Government has set out a highly competitive non-domestic rates package as part of the 2017-18 budget. That includes reducing the rates poundage by 3.7 per cent, 46.6 pence, expanding the small business bonus scheme so that it lifts 100,000 properties out of rates altogether, and raising the threshold for the large business supplement so that fewer than 10 per cent of properties pay it. We are not insisting on a revenue-neutral revaluation that would have meant setting a higher poundage. We are not proposing a nationwide transitional release scheme, as such a scheme would mean many smaller businesses funding reductions for a few large utility companies. However, councils can use the powers granted through the community empowerment act to apply further rates reductions locally, separate from the Government-funded release that I have just touched on. I thank the cabinet secretary for that answer. In other parts of the UK, Governments are putting in place transitional measures to support companies who are seeing their rates bills rise. However, the cabinet secretary will not do the same for Scotland and calling transitional arrangements a blunt instrument just in committee this morning. That will come as no help to the city nursery in my constituency, whose rates valuation will go from £38,000 to £64,000, with costs likely to be passed on to parents resulting in increasing childcare costs. Indeed, for nurseries across Edinburgh, bills are set to rise by 64 per cent, including 38 nurseries whose bills will more than double. Will he rethink his approach on transitional relief? I think that this is a very important issue, and I think that it is a fair question that is put raising individual circumstances. However, I do believe that it has to be put into context to understand why a transitional relief scheme is not appropriate. If I can cover the detail of this very important issue, the decisions by assessors are independent and such a rating of valuation will have been independent of government. Some values will have increased, some will have decreased and, of course, those who see an increase have that ability to appeal. It would be wrong to suggest that we are increasing business rates, but we are not. We are actually reducing business rates by some 3.7 per cent by not insisting on a revenue neutral revaluation. If I had insisted on an increase, it would have meant higher bills. However, taking together all the decisions around the changes to small business bonus, large business supplement and the poundage, that is the Government forgoing £155 million that we could have received if I did not take those decisions. Put further in context the national package of rates relief, that is £600 million. Specifically on transitional rates relief, I say again that if we had gone ahead with a transitional relief scheme that is automatic south of the border—it is a Government choice but it is automatic south of the border—what it would have meant is that many businesses across Scotland would be paying artificially higher business rates to compensate others—mainly big utility companies and some others. However, I felt that the balance is a fair and proportionate one to ensure that many businesses who are entitled to their rates relief and their rates going down actually see that happen. Over 70 per cent of Scottish properties will pay the same or less as a consequence of our decisions than they do currently. In addition to all those national reliefs that I have described, we also have the Ken Barkley review to look at all the issues in relation to business rates. I am very interested in the methodology of some of the determinations around that. However, the reason for identifying the community empowerment act is that it is right that, in local circumstances, councils feel empowered through the community empowerment act. Perthincan Ross has already used the power and they now have additional resources coming from the stage 1 budget to be able to apply local reliefs that might be right for local circumstances, but I will continue to engage with business. I apologise for the length of that answer, Presiding Officer, but I do believe that that is a very important and fair question to have been put. I think that businesses should hear of some of the support that is available to them to try to help them through. For some of them, what will be quite a difficult time, but when it is set in context, I think that all members can see why I have arrived at the decisions that I have. Julian Martin Thank you, Presiding Officer. Can the cabinet secretary tell me how many more businesses will benefit from different forms of rates relief this year compared to last year? As I touched upon in my detailed answer, more than half of all businesses will pay no rates whatsoever and more than 100,000 businesses for the first time will be exempt from business rates as a consequence of the small business bonus. Further on, the large business supplement, 8,000 businesses will be taken out of that rate as a consequence of our changing of the threshold to the figure of £51,000. Ross Thompson Thank you, Presiding Officer, and to declare an interest as a current and serving councillor at Aberdeen City Council. Given that the First Minister has refused to meet with council leaders and businesses in Aberdeen today, can the cabinet secretary update the chamber on the discussions that he has had with Aberdeen City Council, as well as a spotlight group that has raised the serious concerns of local businesses about the damage that will be caused to the regional economy by the rise in business rates? I hope that Ross Thompson's fairness reflects on the information that I have just given the chamber on the national situation. I am absolutely engaged with Aberdeen City and Shire and the Chamber of Commerce for what was described as a fiery meeting. It was a very constructive and helpful meeting. What businesses in the region asked us to do was for Scottish Government and local authorities to work together on this issue. That is absolutely what I have done. I have worked across party lines as well, engaged with the Administration of Aberdeen and Aberdeenshire councils, to explain the national situation, share information, as I have just covered, but also empower them and give them the support that they require to be able to design an appropriate local relief scheme as well. They have received that very positively. Let us set aside the political point scoring. There is a window of opportunity to work together to have an adequate scheme in place in advance of the financial year. I am quite confident that both councils are working on such a scheme, but my latest understanding is that Aberdeenshire may well be able to provide that before the city, but both councils that I am advised are working on it. The cabinet secretary may have seen the announcement from Scottish Renewables that a number of small renewables projects are set to see the rate rises of up to 650 per cent, putting into doubt the future investment in a number of smaller hydro, wind and solar projects. Can I get an assurance from the cabinet secretary that he is discussing with his minister, your colleague Paul Wheelhouse, that the rate rise is not cutting across the objectives that we all want to see in delivering on the climate change plan and on the energy strategy? I accept the point, and, although there has been an expansion of rural rate relief as well as small business bonus and there are also advantages around community ownership, absolutely the business minister and myself continue to discuss and engage on this specific issue. I am interested, again, on how local relief schemes may be able to be deployed to help individual projects, so absolutely all of that is still under active consideration. To ask the Scottish Government how much additional funding it will provide to North Ayrshire Council in 2017-18 to improve educational attainment. North Ayrshire is one of nine Scottish attainment challenge authorities and received over £3.5 million for 2016-17 to deliver an authority-wide plan focused on improving literacy, numeracy and health and wellbeing across our primary and secondary schools. Scottish attainment challenge authority plans for 2017-18 will be commissioned this month, and funding decisions will be made following a formal review process of those plans. Additionally, as the Deputy First Minister announced last week in 2017-18, schools in North Ayrshire will directly receive a total of £4,392,000 through the pupil equity fund. I thank the cabinet secretary for that answer. Does he agree that those additional resources will give headteachers greater flexibility to improve literacy, numeracy, health and wellbeing for pupils, particularly in some of our more deprived communities? Absolutely. Some people criticise the Government for our departure and giving resources direct to headteachers and to schools, but I think that it is a very welcome transformation and should help us to address the poverty-related attainment gap. To ask the Scottish Government what its position is on waving debt that is owed to it by public bodies in financial crisis. The Scottish Government sets out in the Scottish Public Finance Manual the conditions where lending money is appropriate and also the factors to be taken into account when considering the waving of debts. The key consideration for the Scottish Government is always the economic, efficient and effective stewardship of taxpayers' money. The cabinet secretary will know that NHS Tayside has said that its debt due to the Scottish Government this year will total £36 million. Can the cabinet secretary please tell Parliament if NHS Tayside is the only NHS board in debt to the Government, if this is the largest debt, what the implications are of waving the debt and if his Government might consider this? What I can say to Jenny Marra is that the NHS Tayside, like any public body, has an obligation to live within its means and we expect the board to take action to do so. Brokerage arrangements in place and repayment of brokerage will be agreed over the lifetime and a timeline that supports the stability for NHS Tayside and is fair and consistent across the NHS in Scotland. Murdo Fraser Thank you. NHS Tayside has omitted the need to find £214 million in savings over the next five years just to break even. What assurance can the cabinet secretary give my constituents that they will not see any diminishing in front-line services due to the desperate financial situation that has been allowed to develop in NHS Tayside? Murdo Fraser might want to tell his constituents that he voted against more money for the health services. He was trying to secure tax cuts for the rich, including reintroducing prescription charges, all at the same time as the Government is investing in the NHS front-line services, as well as enhancing the support for social care GPs and other professionals. However, we will engage with NHS Tayside, as you would expect, to ensure that they are in a strong position, and we can give them support to get through this period. To ask the Scottish Government when the Cabinet Secretary for Finance and the Constitution last spoke with the Scottish Fiscal Commission. I held a meeting with Lady Rice, the chair of the Scottish Fiscal Commission and Commissioner Campbell Leif on 9 December 2016, at which the commission presented the findings of its scrutiny of the forecast underpinning the Scottish Government's draft budget for 2017-18. In addition, I spoke to Lady Rice by telephone on Friday 27 January this year. This week, the Fraser of Allander Institute raised concerns about the way in which the so-called additional money that was announced in last week's budget was found in such a short period of time after the draft budget and raised some important issues about the overall budget process and options for reform. Following the regulations to expand the functions of the Scottish Fiscal Commission, which is due to come into force in April 2017, what assurances can the Cabinet Secretary give that Parliament will receive forecasts in sufficient time to ensure that members can provide proper scrutiny to future budget processes? I agree that we need to review the processes of the Parliament, and that is why I absolutely supported the budget review group. I think that there are a number of processes that are worthy of revision, partly because of how the functions of the Parliament have changed the new powers, the timescales coming from the Chancellor's statements as well. The budget process is undoubtedly complex. I think that all members recognise that, and we should all reflect on that together. However, the Scottish Fiscal Commission has certainly confirmed to me that the assessments that we have made are reasonable to inform our budget position, and they certainly have not complained to me about the lack of time to do their work. I look forward to moving into their statutory function this year. However, I say again that I am embracing the review with an open mind. I think that all members should do that as well, so that we can arrive at a better process for our budget, and I am happy to engage with political parties on that. To ask the Scottish Government how many businesses will receive support from the expansion of the small business bonus scheme. As I mentioned earlier, more than 100,000 properties will be lifted out of non-domestic rates for 2017-18, due to the expansion of the small business bonus scheme. Thank you, cabinet secretary, for that answer. Could you share with Parliament what other policies are in place to give SMEs a competitive advantage? The economy secretary has mentioned the Scottish growth scheme, but there is also further advice and support, improved access to finance, help for exports and support around innovation and entrepreneurship. There is also the prospect of the workforce development fund that Mr Hepburn is taking forward. Jackie Baillie For those who are not in the small business bonus scheme, times are indeed tough. England and Wales have transitional relief schemes. Scotland used to have a transitional relief scheme for every previous revaluation. Contrary to what the cabinet secretary said, it is not just utilities that are affected. We have heard of nurseries, tourism businesses who tell in my constituency that we will need to pay off staff. If we bring him examples where there is a real impact, can I urge the cabinet secretary to consider transitional relief? I really do hate to embarrass Jackie Baillie by pointing out her inaccuracies, but last time there was a revaluation there was not a transitional relief scheme either because of the assessment around who would be the winners and the losers. You are not actually correct, and you can keep heckling me if you like, Jackie Baillie, but your question is, if you bring me further information, will I look at options? Of course I will. I am a very engaging cabinet secretary. I like working with people to find solutions. My solutions nationally involve lowering the poundage, expanding small business bonus and taking more people out of the large business supplement, advising people how to appeal if that is the appropriate thing to do, reducing the tax take because of not insisting on a revenue and neutral revaluation and supporting local authorities to implement local rates relief schemes where that is appropriate, but I would say to Jackie Baillie and a number of Labour authorities around the country that you should look seriously at the extra resources that local authorities now have, the empowerment and the enablement that exists, and if it is appropriate to have a further local rates relief scheme that you implement rather than simply carping from the sidelines, you have a responsibility, you should take that responsibility, as I have done nationally, to support businesses. If we had just implemented a national transitional rates relief scheme, it would have meant that many people's bills that have been held are artificially high to pay for others, particularly the big utility firms. I really do think that the Opposition needs to know their facts on this very significant matter. The small business bonus scheme is particularly valuable in rural areas where there are more small and medium-sized businesses. Can the finance secretary explain what impact the rural rates relief could have on Dumfries and Galloway? As well as the range of relief that I have touched upon, what I wanted to do is make sure that we were able to match what was happening south of the border in terms of rural rates relief so that we can catch as many as possible to give maximum support. That was the intention of matching rural rates relief as it relates to the position south of the border. It really does put us in a position where, particularly for smaller businesses, we have the most competitive rates relief regime across the island. Can I ask the Scottish Government how rural deprivation is taking into account in its funding allocations? The Scottish Government recognises the importance of delivering services for rural areas, which is clearly reflected as a priority within the programme for government. In particular, indicators used for the allocation of funding to NHS boards and local authorities take account of rural deprivation. For example, morbidity and life circumstances is a component of the formula that I use for allocating funding to NHS boards. That component adjusts for deprivation. It is calculated for small-area populations of between 500 and 1,000 residents and is therefore able to identify pockets of deprivation in rural as well as urban areas. The formula also takes account of the higher costs of delivering services in rural and remote areas. Richard Lochhead. I commend the additional focus on tackling poverty and inequalities in Scotland issues, which have been exacerbated by Tory Government policy, according to the recent resolution foundation report just last week. However, he is aware that rural deprivation can be quite challenging to identify. I know that there is an increase in targeting by the Scottish Government on the data zones in the top 15 per cent of areas that are identified under the Scottish index of multiple deprivation. Areas such as Murray do not qualify in the top 15 per cent, as do other areas in Scotland. Therefore, can I have an assurance that there is a safety mechanism in place that identifies rural deprivation, which is difficult to measure at times, but must absolutely be supported in the same way that other communities are as well? Yes, I do believe that there are such mechanisms in safeguards such as through the local government finance methodology. Also, if you take the attainment fund on a school basis, the coverage of that fund to tackle inequality has reached every local authority in Scotland. Audit Scotland has reported in the past that many people living in Murray are classified as being deprived in terms of their ability to access services. What is the Scottish Government doing to address that issue? I think that eligibility is a very fair point. There was a time pre-administration when funds were targeted on an area-by-area basis on postcode and just areas of multiple deprivation. It could be poor and potentially eligible, but living in the wrong areas to get support and access for services. We changed that in many of our funding streams to target more support based on your eligibility. Are you less well off? Should you be entitled to services rather than living in a certain postcode? That is a good practical example of how Governments change policy to genuinely target need rather than just a data-zone approach. It has to be a balance of targeted interventions and universality, where eligibility is taken into account. Thank you, Presiding Officer. The cabinet secretary may consider himself engaging, but he failed miserably to engage with any of the four brief points in my supplementary question. I would like to ask your advice on what is the point of supplementary questions in Parliament if the minister simply answers again the question that was tabled. If I can remind Derek Mackay that my questions were, is NHS Tayside's debt to the Scottish Government the largest debt? What are the implications of waiving the debt? Will his Government consider doing this, and is it the only board in Scotland that has such a debt to the Scottish Government? If the cabinet secretary cannot answer this question in Parliament, maybe he will be kind enough to write to me and engage with the points then. Thank you, Ms Barrett. That is not a point of order. However, she has made her point, and I am sure that she is perfectly capable of putting down written questions or putting them in a letter to the minister who will consider them. We are now going to move on to the next item of business, which is a debate in the name of Jamie Hepburn on Job Center Plus. I will just take a few seconds to change seats.


Good afternoon. Thank you all for coming. My name is Dahio Kallig. I'm the chair of the UK group in the Institute for International European Affairs. And personally, I've had some connection with the UK. I spent 11 years in the Irish Embassy in London. Six of them as ambassador. So I'm reasonably familiar with government and administration in London. At least I hope I am. Thank you all for coming. The format is, I'll say a few words, followed by my four colleagues who will say a few words each. And then we're open for question and answer and discussion. And everything is on the record. There's nothing off the record. And the purpose of coming here is just to launch this report from the Institute. It breaks a status report. I hope you all have a copy. It's really designed to provide information about how the negotiations might be conducted. It's intended to be a reference guide. And it doesn't take any sides on any of the issues. It's just intended to be something that's usable, something that's readable for people who are interested in the coming negotiations. There are 11 chapters which are divided into five sections. The first pretty much sets the scene, the context. Brendan Halligan has written that first chapter and he'll talk about that in a few moments. Tony Brown has dealt with the, what's happened since the referendum up until now. And believe it or not, he even has a paragraph on the May speech which happened yesterday. The second deals with preparations within the EU. And the one chapter has been written by the Brussels branch of the IIEA. And the other by Catherine Day, who's probably the most distinguished Irish person to work as an international civil servant. And it's a great pleasure, Catherine, that you're here. And then there is a chapter on the UK written by Paul Gillespie, the first one and the second one by John Palmer. Paul concentrating really on the issues from a London point of view and John somewhat on the issues from a Brussels point of view. And finally, the last two sections, section D are the implications for Ireland and the last section are the implications for business. Now I think it's beyond doubt that Brexit is one of the greatest challenges that has faced this state. And it's going to require enormous effort on the part of the Irish government and of Irish business to ensure that our interests are protected. And to ensure that we come out of this negotiations, which could last for a very long time, that we come out of them as vibrant and as good an economy then as we have now. There are, I think, three particular areas that are important. Well, there are more than three, but there are three in particular. There's our trade with the UK, which is important for our smaller companies in particular, and very important for agriculture and for our agribusiness. It's the common travel area, but the one for me, I think, which is really the most important is Northern Ireland. And it's the one about which I personally am most concerned because the difficulties in Northern Ireland, and we've seen them to the fore in the last few weeks, those difficulties were solved over a very long period, more than 30 years, by two governments in London and Dublin, by politicians in London and in Dublin, and by civil servants in London and in Dublin who had, within the European Union, learned to work together and to resolve differences together. And what really worries me is that over the coming years, that that very close relationship between London and Dublin, that that will, to some extent, atrophy because of the fact that we will be in one camp and they will be outside. Now, I said that there are no opinions expressed in the status report, but you might forgive me or bear with me if I give you a few opinions myself. Nothing to do with the report. The first is, really, it is good that we've had the May speech yesterday. We now know what the British want, and I think it is better that we know what they want. But frankly, there was nothing particularly new in the speech. Those of you who have read the book that we published two years ago, where we argued for a bespoke arrangement for the UK, we argued for that bespoke arrangement within the European Union. They, unfortunately, took a decision to have a bespoke arrangement outside the European Union. But there's nothing particularly new in the issues. What I think is good about yesterday is, firstly, that there's been clarity that they've said they're going to leave the single market. They have effectively said they're going to leave the customs union. They're going to introduce regulations for immigration, and they're going to distance themselves from the European Court of Justice. Where is it all going to end up? We certainly don't know when, but I think we're likely to end up with a free trade agreement or a series of free trade agreements dealing with different sectors. How difficult they will be to negotiate, I don't know, but I think that's where we're likely to be. And they'll be supplemented likely by various other agreements to cover things like foreign affairs, maybe defence, and so on. So there'll be a series of agreements. And Mrs May made clear yesterday that she doesn't want an instant break. She wants things to change smoothly, and that should be helpful for Irish business. It should be helpful for those trying to sell into the British market and trying to compete with the British. So that's on the positive side. On the negative side, I have to say I didn't like at all the threats that were contained in the speech. This negotiation will be successful to the extent that both sides are helpful to one another. And I don't think threats are ever helpful. But at least we know where it's likely to end up. There has been a lot of talk and a lot of worry in this country about the future. I'd like to end on a positive note. I'm old enough to remember what this country was like 40, 50 years ago. It was very poor. There was very little opportunity for people in this country. This country has changed profoundly and changed profoundly for the better. It's probably been the most successful country economically in the European Union over the last 40 years, in spite of the difficulties, and particularly in spite of the recession 5, 6, 7, 8 years ago. It's been a very successful country. I see no reason whatsoever why this country cannot be equally successful in the future as we go into Brexit. And I think it behoves all of us here to support the government in its attempts to ensure the best outcome for this country. That's not in the report. So I now invite, if I may, Brendan Halligan. Good afternoon and thank you for opening this presentation. And thank you all for coming indeed to the launch of the status report. I think you can take that as Ireland's leading think tank that the Institute has been looking at this issue for quite some time, in fact over 25 years. And we've now come to this seminar here today. We have published three books, as Dahi has said, over those 25 years. Numerous reports. And we currently have on our website, which I invite you all to look at, if you haven't seen it already, a Brexit brief, which is giving you a reportage, listing what's happening and giving you links to all the various documentation. And we've just begun to publish what we call Brexit Intelligence, which is an analysis of what's happening for the busy executive and or civil servant. And now this status report. The instructions, as Dahi said, in regards to the status report, were simple. You write no more than 1500 words to keep at the facts and you will skew personal opinion. And now we have Mrs May. So the first thing I want to do is thank her for having timed our speech for yesterday. It was most convenient and we're very grateful to her. But the first point to make, I think, in response to it, as Dahi has said, is that there's nothing new in the speech and this was to be expected. What we have looked at, what we have seen, our conclusions have been over 25 years that ultimately politics was going to dominate economics. This is as a result of a movement in terms of English nationalism. So immigration controls have been given primacy over all other considerations, along with ending the jurisdiction of the European Court of Justice and with a desire to keep transferring, making a financial contribution. So those three priorities added together, the logic of it is that you sacrifice membership of the single market and indeed of the customs union and you reimpose customs and passport controls and, as she said yesterday, you conclude something like a free trade agreement with the European Union as a third country. Because the point is now that all the rights and obligations that arise from being a signature to treaties will end on a particular day and at that point Britain becomes a third country. So to use an expression that she used herself yesterday, I think to put everything in perspective, they're fully out. There's no half in and half out. What we don't know, Dahi has already alluded to and I think it's very important to us today in the status report to assess what it is we don't know. As he has said, we don't know what the contents of the free trade agreement is going to be like. We don't know the form of it either and we don't know equally important for us on this island as to how the common travel area is going to be maintained, despite the good intentions of both governments. I think however one of the most important things that we don't know is the relationship between article 50 of the Treaty on the European Union and article 218 of the Treaty on the Functioning of the European Union. We don't know whether or not these are going to run in parallel or run in sequence. Mrs May is certainly of the view that they will run in parallel. She refers to the fact that article 50 makes reference to the new arrangement between the outgoing member state and the European Union. And she says you can't make reference to something that doesn't exist. On the other hand, article 218 is very clear that it's designed to handle the processes for concluding a trade agreement between a third country and the European Union. In other words, you can't really get into it until such time as Brits have actually left the European Union. There's a dilemma here, there's a catch 22 and how it's going to be solved, I'm not quite sure. That means that following the day in which British membership ends of the European Union, there could be two transition periods, not just one as has been talked about. There could be a period to do with the running down of the Aki communitaire on the one hand and running in the new arrangement on the other. But there could also be a period simply to get to the new arrangement. Now all of that has got profound implications for business because it could elongate the whole period of getting to a stage where we actually know what's happening. The other thing that she did not mention yesterday, which I think adds to the uncertainty about timing, is that there's going to be a bill to be paid by the United Kingdom for disengaging itself from the European Union. As you know, the figures being brooded about at the moment in Brussels particularly vary between 40 and 60 billion, with a lot of emphasis on the upper end of that spectrum, 60 billion. Also, the intelligence would indicate that, from the point of view of the Union, that this is to be the first issue to be sorted out before anything else is agreed. So you can imagine that that can take quite some time and it leads into a very limited timetable anyway. You all would have seen what Barnier said about the division of the two years, really leaving herself with just a little over a year's actual negotiating time. So we don't know what's going to come first here and we don't... The real problem is I think that the debate about the bill could delay the timetable and if it does delay the timetable beyond two years, you're into really serious political water here because you have European elections just shortly after the expiry of the two years. The incoming European Parliament will need at least four to five months to get up and running and all that's wasted time if you want. And of course at the very end of this it's got to give its assent to the whole deal. But where that extra time to spill over for 12 months or more, you're now into the British general election in 2020. So all of this could be quite problematic to say the least with and we're not talking about what else might happen in other countries such as France and in Germany. The next phase of this study of ours will be on what we call at the beginning when we're setting the scene is an asymmetric shock because our belief is that Ireland will be obviously more disproportionately affected than any other country both politically and economically. Politically we don't have to explain why because of Northern Ireland but economically as Dahi has mentioned about trade there's also the things such as free movement. But for me which I mentioned in my opening chapter it has always been a fear of mine from the very beginning and that is to say the disadvantageous movements in the exchange rate between the euro and sterling. So devaluation I think is the greatest threat to our continuing competitiveness. As we've seen the pound is depreciated by approximately 20% since the decision and what I would now think drawing on historical analogy is that we need something like we had in 1979 when we joined the European Monetary System. We did so obviously everybody knew what the risks were at that time and both France and Germany went out of their way to facilitate us by giving us very major loans at the time at very reasonable rates and later on of course we had the cohesion funds. I think that something along those lines are needed now and I was interested to see that this point came up yesterday in the oil. So that's the challenge ahead as to how we're going to get through this period which is an adjustment which in my view will take the economy at least 10 years. So to summarize what Dahi has said the three issues were trade, free movement and Northern Ireland and the which I've added as the asymmetric shock. Thank you. So good afternoon everybody. I'm going to go a little bit deeper into some of the nitty-gritty of how will the negotiations actually happen. It's new territory because Article 50 exists for the first time in the Treaty of Lisbon so it's untested but it's a relatively short and relatively clear article it's triggered by the member state that wants to leave and there's a two-year time period for the exit to be negotiated. It can be extended by unanimity but I don't think that's likely to happen. Now as we saw in Prime Minister May's speech yesterday actually the more interesting and more difficult thing to negotiate will be the separate negotiation on the future relationship between the EU and the United Kingdom and in practice both are linked because we will have to have answers to a lot of questions written into the Article 50 agreement before we can conclude it and that will then shape quite a lot of the negotiations on the future relationship as I'm going to talk a little bit about in a moment. I think everybody agrees that yesterday's speech did clarify a number of issues and they will certainly help with the Article 50 negotiations. Prime Minister May's speech was clear that the UK wants to be out of the single market out of the common commercial policy and out of the common external tariff and note I don't say out of the customs union because I think parts of the speech don't quite say that. I think the speech was clear at a high level of generality but of course it was of necessity perhaps lacking in detail and it was an opening bid. I think she was setting out basically something close to well we'd like a good deal with very little obligations and how else would you start such a negotiation? So a lot more detail has to come. The successor negotiations of what kind of relationship the EU wants to have with the UK and the UK wants to have with the EU will of necessity take a long time. It's not only because there are 28 countries involved it's also because unraveling a relationship that has been built up over 40 years is intrinsically difficult and given the level of ambition set out by Prime Minister May yesterday it is likely to be what the EU calls a mixed agreement requiring agreement of all Member States and all Parliaments and as we saw with the recent travails of getting the Canada Agreement across the line even the Walloon Parliament and lots of other Parliaments will have their say so of necessity it's going to be a long drawn out experience. And I was glad to see in the speech yesterday the recognition of the need for transitional arrangements because that is very, very clearly going to be necessary. The successor agreement cannot be in place on the first day after the UK officially leaves the EU. The speech also implied a desire to have different transition periods and we'll have to see what the other 27 Member States make of that. Now in procedural terms the negotiations are going to be conducted by the Commission that's the norm in trade negotiations it's also interestingly the norm in accession negotiations so here we have the opposite of an accession negotiation but of course every Member State will follow very, very closely so there will be very, very regular debriefings President Tusk's staff will be represented in the Commission negotiating team as will the rotating presidency and Corriper, the General Affairs Council will have a key role in preparing the European Councils which I expect to discuss this issue at every single meeting they will have for several years to come. What kind of successor agreement could there be? First of all it's clearer and it's more clear since yesterday that it will be tailor made, it will be sewer generous but of course we already have a lot of examples to draw on and over many years the EU has concluded free trade agreements with lots of third countries and over the years these agreements have gone well beyond just trade in goods so they now include a whole lot of other things from obviously trade in services but also some have justice and home affairs cooperation in them, some have cultural cooperation in them so there are examples to draw on and each one is tailor made in the end of the day. An issue that I think will start to become clear is the extent to which the EUK will still be bound by EU rules and regulations after it leaves and I think this is beginning to dawn on parts of the UK business because in order to sell to the European Union European Union rules will apply and just like Norway I think there will be a frustration in the British civil service and in the British business community that they will not have an influence over shaping future EU policy but they will of course be bound directly by it but you can't have your UK can eat it and that's one consequence of leaving the EU it's also clear, I mean it's very clear that the two things the UK wants to escape from is freedom of movement and the control of the European Court of Justice but for any free trade agreement to work there has to be a dispute settlement mechanism what happens when all the good intentions fail to materialize and there's a breach or a perceived breach of an agreement so there will have to be still some sort of supranational way of sorting out disputes in the regulations to come and that will also be part of putting a final agreement together. I think there is a lot of discussion about how will these two discussions run in parallel it's clear legally that the EU can't conclude a free trade or any other kind of agreement with the UK until it becomes a third country but that doesn't mean that a lot can't be worked out in advance and I think in practice discussions will run in parallel they will not be concluded but they will have to run in parallel because to a certain extent anyway what will be written into the article 50 agreement will then be taken up in the successor agreement I think the commission has maybe been misunderstood on that I don't think the commission has ever said and certainly doesn't intend that we will have no discussion with the UK before it actually leaves the union on what the successor relationship will be that would not make sense that would lead to even more disruption than we're likely to face at the moment but of course both legally but also technically it won't be possible to neatly conclude the two sets of negotiations in two years and then have one smoothly take over from the other simply because of the amount of time the amount of people involved and the amount of detail that will have to be sorted out I don't believe either that the EU will be vengeful or punitive in these negotiations I think everybody will approach the negotiations with a very hard headed sense of what is their own self-interest and it would be naive to believe it would be anything other than that I think that the special case of Ireland and Northern Ireland has been very well accepted by the Brussels institutions and by the other 27 member states but the details have to be worked out and while I think the special case on the common travel area has been accepted we don't have a special case on the economic or trade matters, there every country in the EU is competing with every other country so those will be tough, tough negotiations I think that, and this is an important point that I think hasn't received enough coverage yet Brexit will also mean inevitably that the EU will now reshape itself the loss of the UK budget contribution is clearly one of the early triggers taking away 17-18% of the EU budget doesn't mean that, it's business as usual and that's going to be an early sign of the change but more importantly I think politically in terms of EU future integration we are going to have to have a debate here about what is our view on how differently the EU will look in 10-20 years time from what we would have thought about before the 23rd of June last year I think that it will inevitably be more continental and that may not always be to our taste so I think there is going to be an ongoing need for Ireland to network much more intensively with other small like-minded member states to make sure that we are very active and have our say and advocate our views in terms of where the EU is going to go next and for me that will also mean the need for much more public engagement here and much more debate in Ireland about what it is we get out of the EU he said very passionately and I couldn't agree more that Ireland has been perhaps a major beneficiary of EU membership but we will have to go back and rethink now and think differently about what do we want from the next generation of EU membership I want to just finish with a couple of comments on what are the issues for the EU and what will the other 27 be thinking about I think the phrase cherry picking has already been done to death in the last 24 hours but that will be one of the things that the EU will try to avoid and reading the speech I thought it's no accident that Prime Minister May has mentioned cars and financial services those are key sectors for the British economy but they're also key sectors for other member states economies so the idea that you can have the deal you want on the sectors that are important to you and you don't have to take account of anybody else's wishes is simply not a realistic negotiating target it may be a good opening bid but it's not a realistic negotiating position I think a lot of work is being done and will have to be done on what kind of customs cooperation do we want to have as I said already to sell into European market into EU markets EU rules apply and there will be a big issue for checking rules of origin if the UK is not going to be bound by the common external tariff and as we know the modern world is not like the old fashioned one where goods were put on a ship and they arrived in a port now we have multiple entry exits of intermediate stages in producing goods not to mention all the complexity of the modern services sector so we will have to see what kind of checks will be put in place to allow the kind of degree of customs cooperation that Mrs May set out in her speech yesterday the finance issue not only the loss of the UK contribution to the EU budget but also what will the UK have to pay for access to the European market in the future other countries that have access to the single market pay into the EU budget at the moment that money only goes to the new member states so there are many many questions that will have to be worked through in the future and the other member states will be looking very carefully at what kind of special deals are done because they will want to avoid contamination and I think it was no accident that the Taoiseach was very recently in Madrid talking to the Spanish authorities who will keep a very close eye on what kind of special arrangements are made between Ireland, the UK and Northern Ireland there is also the question of what happens to EU citizens in the UK and British citizens living in the rest of the EU and while probably many member states would like to do a deal quickly on that, my feeling is that everything will remain to be agreed at the end because everything is now a bargaining chip and I doubt if many member states would be willing to sign up to something partial until they see the full shape of the whole deal so that will be important and finally the transition arrangements and what rules apply during them so probably to all intents and purposes the day after the UK leaves will feel very much like the day before they left because it is going to take time to work out the transitional arrangements to put alternative arrangements in place like it or not this is going to take quite a long time and I think if and we will come to an ad in very tense moments in the negotiations but the option of simply saying ok we've had enough and there's no deal possible therefore we walk away from it because to not have an agreement in place with the EU means falling back on WTO rules but they also take time to negotiate and with far more members than the 27 of the EU so I think we're in for a lot of mind numbing tedious technical negotiations that will float up to the political level every so often and then go down again into the committee rooms in Brussels I think there will be the will to succeed because this is very important for all kinds of reasons but I think it will be a hard headed negotiation and we need to be prepared for that thank you I want to start though with a bit of a political point not a party political point but a political point and that is that it remains at the level of very much a draft political project that is to say as has been typical frankly of successive leaders of the Conservative Party in recent years it's drawn up with two audiences in mind internal audiences in mind obviously following the referendum the very narrow but nonetheless clear referendum decision the Eurosceptic wing of not only the Conservative Party but of its electoral the wider electorate secondly there remains in the Conservative Party certainly in the parliamentary Conservative Party actually a majority of MPs who are as yet far from convinced about the risks and the dangers involved in the entire project and I think it's perhaps helpful to see what Prime Minister May has been doing in recent months as alternatively offering reassurance to the different wings of the party and I think this document is a stage in that process and let me give you a few examples of what I mean I think this paper definitely tilts the balance towards a harder Brexit than appeared to be the case even 48 hours ago on the one hand and it's clear and other speakers have made this point the dominant motive is the need to be seen regaining control of borders control of labour movement control free movement of EU citizens to the UK but notice on the other hand less attention has been perhaps given to this that in one sector after another the government are soto voce making it clear it will not be included in the new regime for example, some of them are fairly obvious the National Health Service could not possibly continue to function and it does so at the moment with great difficulty without an enormous infusion doctors, medical experts of all kinds, nurses not just from the European Union but very significantly from the European Union it's already clear that the NHS is just one of a number of sectors where the new rules whatever they will be and we don't know much about them whether it's quotas whether it's the need to have prior employment agreements before you can move are not going to apply in the science sector the wider science sector which is of critical importance and probably has the greatest political danger if it goes wrong because not only the British science faculties and universities play a very important part in the European Union's research programme in many cases they play a leadership role in the European Union's research programmes and with it goes a great deal therefore of the funding for British scientific research high tech sectors of one kind or another have also been told that they will be able to freely attract people coming from the rest of the European Union seasonal workers in agriculture is another sector and there are others I don't want to over stress any of these points but what it's a little bit like a complicated polka dance first this way and then that way which is designed to meet objections and reassure people but at the end carries the risk that it will satisfy neither side because when the impact of all the exemptions from the new migration rules as yet to be determined emerge it may well be people say but it's made little or no difference so I think that is the first point I want to make about the volatility that lies the political volatility that lies beneath the attempt by the government to spell out a coherent initiating strategy then there are other issues which I think have yet to be fully addressed the question not just of existing social rights, labour movement rights for British workers and employees but of to what extent the government would be committed to match future progress at the European level so that Britain as it were doesn't get left behind in the way that might be seen as implied in some of the remarks that have been made in the last 24 hours about the fact that the UK reserves the right to adopt a completely different economic model if the negotiations don't succeed which the Chancellor went so far in Berlin as to imply but not quite state might be some kind of tax haven approach with all the implications for lowering of standards cheapening of labour costs in order to achieve competitiveness that way which has already led to questions being raised in the UK by the wider labour movement so there are real elements of unpredictable volatility in the situation how Catherine has quite rightly identified and very clearly identified extraordinary I think unprecedented time frame in which all of this is meant to happen it isn't 2 years of course it is at the best 18 months because at least 6 months will have to be left for the ratification process if there is an agreement and it emerges from it and of course informal talks as she rightly said are certain to begin in parallel with the divorce negotiations with all negotiations including the money to be paid including a lot of other tricky issues but informal talks are one thing when things are put on paper in formal negotiations difficulties can emerge that don't clearly emerge at the level of let's have a chat so we get each others viewpoint as to where you want to go and where we would be prepared to go so I think that there must be a very significant political question mark over the doability of this entire timetable for what is being talked of the nature of any transitional period and there will be an urgent necessity for several different transitional periods according to the way we are going at the present time it seems to me also can't seriously begin until the withdrawal principles are finally agreed and established and there is a very real risk that the clock will simply run out and I think again Catherine is no more than realistic in saying people aren't going to be rushing to extend the clock indefinitely if that is the case and this brings me to another point which is again frankly political but I think it's perhaps interesting to an Irish audience to get the sense of the politics of it across the water what happens when it's brought back to the House of Commons and the House of Lords what happens when whatever agreement there is if it's a mini agreement if it's a mini transitional agreement if it's a bigger agreement whatever here we encounter a quite different set of problems the government may face frankly it can't automatically on its present parliamentary majority guaranteeing passage of whatever is agreed no matter what don't need to take my word for that there are very many leading members of the Conservative Party including former ministers that have spoken outright about their objections to the entire process but of course they couldn't and indeed you might argue democratically should not have tried to block the beginning of the article 50 process but the conclusion of the article 50 process whenever it arises is a very very different a very very different kettle of fish and I think that whether it is in the second half of 20 20 hang on it begins in March 2017 so 18 months would bring us to December 2018 6 months before the expiry of the two-year period there's going to be a very very fraught debate and an unpredictable debate and in my personal opinion by no means an assured debate for the outcome that the government wants I think the risks of that going wrong are far greater than have been generally recognised when the kind of price that will have to be paid in principle for the very limited access that they are likely to secure to the single market on the terms that are likely to be forthcoming and given the fact that the closer they look at the WTO process and all the tripwires that that contains I think their bargaining situation will not get obviously stronger the longer the negotiating timescale passes and then there is another major open question lying behind domestic question in the UK lying behind the government's negotiating strategy Cardiff Edinburgh and Belfast it would be particularly disastrous if there was no administration in Belfast for any significant length of period ahead while this is all going on and I think it wouldn't be so much a matter of dispute between the two traditional communities I think could well be a common ascent that they need an administration one question that is being asked for which there is no clear answer at the moment is in the repatriation of powers that is sought in the British withdrawal negotiation who are the beneficiaries of the transfer of powers in other words what goes to London the kind of way it's spoken of the repatriation of powers the assumption is everything goes to London but that isn't the case any longer certainly the implications of the constitutional settlements the so-called devolution settlements which are becoming more than just minimal devolution I think raise very important questions and there is likely to be serious competition between the emerging different power centres in the UK system between the devolved administrations as a whole and London in the case of Wales for example it actually works in a way that you might not imagine they are not at all anxious to have responsibility for the Welsh agricultural policy given the costs that would be imposed upon the Welsh budget it's something that we wouldn't want voiced upon them whereas in many other issues Edinburgh and Cardiff certainly will be looking to add to their powers because they will argue rightly should be the inheritors under the devolved arrangements of the returned powers I want to just add two final points which you may think are a bit adjacent to this report excellent report and a very clear report and that is we speak Theresa May spoke quite openly and positively about the whole question of Britain's her desire to work as closely as possible and with great friendship and in close amity with our European neighbours as she puts them on security and defence now it's one thing to say this when one could assume that the architecture of western security and defence was impermeable and in place and not likely to change in any way irrespective of these negotiations but following the election of President Trump I don't think that can be taken for granted I don't think it necessarily follows that the alliance structure the NATO alliance structure as we have will survive unscathed the next four years I'm not going to predict because I have no idea absolutely no idea of which direction it could go in but to hear what is being said by the incoming leaders of the new administration a great deal and that I think could put the UK in a particularly awkward situation a year or two hence when it may not be able to count upon the permanence and unchanged nature of the NATO alliance's operation in building on and seeking to keep a handle on the nature of European security and defence development so I don't add anything that's been said to the Northern Ireland thing I found it interesting that the Prime Minister was unable to say much more than any controls on the border would be as frictionless as possible I'm not quite sure that meets the kind of political tests that will and security tests that it may be subject to in the future my very last point then is to say that yes the option for a harder Brexit out of the single market out of the common commercial policy and effectively out of the customs union seeking only external relationships with it is at the radical end of the spectrum that might have been imagined I think it would be wrong not to believe the government is serious about it but it might be equally foolish to imagine that this government will have the political lasting power, staying power to be able to carry the implications of the whole process through to the end I wonder whether in that vote that takes place at the end of the process we might not be faced with the choice of if it's defeated of either a new referendum or a general election or the incurring of a withdrawal of article 50 which is still possible within the two year period as Jean-Claude Piris the great legal expert on these matters has made clear either way we could find ourselves in as unpredictable a situation as we currently face as a result of the events of the last few weeks thank you you may think there's not a lot extra to say after those three excellent contributions and you may well be right but I'd like to start by I suppose putting this report in a context and the context was described at the beginning by Brandon this is the latest output in a 20-odd year to thinking about relationships between Britain and the European Union with a specific reference to the implications for Ireland and when we tried at the end of this report to pull together what were the key issues from an Irish perspective the conclusion was that there are indeed three interconnected themes central to the Brexit negotiation and outcome they've all already been touched upon but to restate them the Irish government's capacity to influence the EU negotiating position while retaining productive links with the UK government and administration secondly finding a solution to the specific challenges posed by Northern Ireland and thirdly developing policy aimed at securing Irish economic competitive post-Brexit taking the longer term view of what needs to be done in this substantial change in the external environment which faces us and I'd just like to briefly reflect on each of these in terms of the government influence on the EU position we're clearly just beginning to and the May speech has helped in this regard to get a clearer sense of what the basic framework of this negotiation would be but as expressed particularly by Catherine and John there needs to be a very acute awareness about the scale of the challenge of succeeding or concluding a negotiation within the timeframe that we're talking about the atmospherics of that political negotiation are going to be crucial and to some extent it could be argued that some of the contributions in some of the context of Mrs May's speech yesterday don't help in that atmospherics but I think at the end of the day what Catherine said this will ultimately be a negotiation a hard headed negotiation based on self-interest of the parties on both sides of the table and the hope has to be that there will be a pragmatic pragmatic conclusion and leading on to a sensible arrangement in regard to transitional arrangements the other aspect is that we and I think we have to be very clear about this that whereas Brexit looms large in all of our thoughts Brexit is not going to be the only thing that's been happening that is going to happen in the European Union European Union is going to have to think ahead five to ten years as to the policies the priorities etc and this is going to represent a challenge for Ireland and it's going to come back to identifying very clearly what do we what direction do we want the European Union to go in over that period what are our priorities who are our allies in attempting to secure that so that seems to me to be part of the whole our whole positioning within Europe over the next five to ten years the second issue and it is really specific to Ireland is the Northern Ireland challenge and here it has to be very clear that the logic of Mrs May's priorities yesterday are that it will be very difficult to achieve some of the other objectives that the politicians state they want to achieve you actually cannot have both an exit from the customs union and the single market and not have the return of the border within this island that's the logic of what you that's the logic of that position so how do you square what are positives in terms of political sentiments in terms of no return of a hard border maintenance of the common travel area how do you square that with practical policies and we're only beginning to I think see some possibilities we're talking about frictionless trade on the basis that something akin to what happens works between Norway and Sweden how can that be further developed and worked on the question of the people how do you achieve the common travel area that's obviously there's still a lot of work to be done in that regard and then there is again what the politics of this is going to be over the next period of time when the first and deputy first minister wrote to the British government in August they talked about a triangular relationship between Dublin, Belfast and London how is that going to be achieved particularly in the context of not having an executive in Northern Ireland the third area is the one that requires us to do some longer term thinking is taking account of the reality that we're going to be in a colder economic space and more challenging economic space post Brexit and there are two dimensions to this both of which are touched upon in the report the first one was what Brendan referred to as the currency issue I think it's a fair to make an assumption that the relationship between the sterling and the euro is going to work to our disadvantage in the medium term the second is that any movement towards Britain's exit of the single market and customs union is going to have some element of trade restrictions which again will make it more difficult for us these two things together point to the requirement to really focus on how does Ireland work towards an enhanced economic competitiveness over the medium to longer term and what needs to be done in order to achieve that Brendan made the analogy of the transitional arrangements that were made in the late 1970s when Ireland moved towards economic and monetary union there's an analogy that can go back even further back in the 1960s as Ireland realized that it had to prepare for more challenging times ahead it had what was called the committee of industrial organization sector by sector we looked at our economy where the weaknesses are where the improvements were needed so that sort of thing is going to be required but we are in a much better position than we were in those 50 or 60 years ago and this I think can be done we are already committed to working harder on our trade diversification diversification policy so our conclusion at the end of this report is that we really are faced this Brexit issue requires us to realize that we have basic choices to make in our national development policy the government has taken the position and there are very good reasons for this that we remain a committed member of EU 27 and we take the consequences of that we take the consequences of it in terms of thinking through what we want from EU 27 as it develops but we also have history and geography dictates this we also have a close connection with the UK and how we square that circle and how we keep those positive connections with the UK to enable us to complete this negotiation as well as possible and to look to the longer term basis of our relationship with the UK that remains one of the key challenges as we go forward so thank you very much indeed