Good morning, everybody, and welcome to the second meeting of the Rural Affairs, Island and Natural Environment Committee in session 6. Before we begin, I can ask everyone using electronic devices to switch them to silent, please. Before we move to our first item of business, I would like to formally welcome Beatrice Wishaw, who replaces Liam McArthur on the committee. I would like to thank Liam for his very brief but important contribution to the committee's work. I invite Beatrice to declare any interests or say that you have no relevant interests to declare. To move on to our first item of business today, it is to select our new deputy convener. The Parliament has agreed that only members of the Scottish Liberal Democrats are eligible for nomination as deputy convener of the committee, so no seconder is required. Do we agree to choose Beatrice Wishaw as our deputy convener? Any objections? Raise your hands? No? Well, I congratulate Beatrice on her appointment. Agenda item 2, decisions on taking business in private. Our second item of business this morning is to agree to hold discussions about evidence taken in private both at today's meeting and those in the future. Returning members will remember that those discussions follow each evidence session and allow members to freely discuss issues raised during the evidence sessions. Those discussions greatly help with officials when we are taking evidence as part of an inquiry and where a port is to be drafted. Are we all agreed? Thank you. We will now move on to agenda item 3, food and drink supply chain. Item of business today is an introductory session in Scotland's food and drink supply chain with our key stakeholders. In this session, the first of a series of introductionary sessions for the committee that we will be holding before the October recess, and it is an opportunity for members to explore all the key issues spanning the policy areas that this committee is going to cover over session 6. Remotely, I would like to welcome to the meeting our first panel. We have Jeff Ogle from the chief executive food standards Scotland, Fraser Greave, the deputy director of strategy and communications from the Scottish Whiskey Association, James Withers, the chief executive of Scotland food and drink and Professor Mary Brennan, the chair of the Scottish Food Coalition. To start off, I would like to invite Jeff Ogle to make a brief opening statement followed by Fraser James and then Professor Brennan. Thank you. Good morning. Good morning. Thank you, chair, and good morning to the committee. So, just talking about food standards Scotland, our remit covers all aspects of food and feed chain, which can impact on public health with our aim to protect consumers from food and feed safety risks and promote healthy eating. We are independent of Scottish ministers and are directly accountable to the Scottish Parliament. We recently set out our new strategy for 2021-26 healthy, safe, sustainable, driving Scotland's food future, which describes our approach to changes in the food landscape, consumer interests and our responsibilities as a regulator. Today, I will talk briefly about some of those key challenges. The first one is EU exit. FSS has seen a significant period of change following the UK's decision to leave the European Union. The first one of those is with regard to recruitment of veterinary expertise and indeed meet hygiene expertise. All of our veterinary colleagues are EU nationals and without really access to a supply of qualified vets from the EU or elsewhere, we are now struggling to recruit our business needs. We also have similar problems in terms of recruiting meet hygiene inspectors and changes to civil service. Nationality rules now prevent the recruitment of EU nationals as meat inspectors. Supply of vets in government is new and critical levels, and we need to see some changes in the approach that we currently have with regard to our ability to recruit. We have also seen a significant range of new responsibilities, including a detailed risk analysis process for new food products. We are working with the food standards agency that covers England, Wales and Northern Ireland. We have established a robust science lab process for the risk assessment and approval of novel regulated food products with over 400 applications already under consideration. This was work that was already undertaken by the European Food Safety Agency previously. To help deliver an effective system of regulation for food exports, we have stepped up to provide support for Scotland's fishery exporters and our three centralised hubs have signed over 8,000 certificates so far this year. Again, this is a complete new year requirement as previously there were no non-tariff barriers for exports to the EU. A significant increase in demands for vets to complete certificates has a fuelled salary inflation as the pool of vets is decreasing at the same time as demand for services is increasing. We are also involved in preparations for imports, which also have a limited role. We have lost access to the rapid alert system for food and feed, and we have worked with international partners to deliver new mechanisms for monitoring food crime and food safety incidents. Ultimately, as I am sure others will talk about this morning, on-going labour shortages in the food supply chain mean businesses are becoming stretched. The risk is that shortcuts are taken to meet custom demands and deadlines, and this increases the chance of mistakes in the system and risk to consumers. One conclusion from all of this is that we have simply done what is necessary as a consequence of leaving the EU, but the core message from us as a regulator is more nuanced than that. The EU currently remains Scotland's biggest export market, and as a third country, not just for the EU but also for the rest of the world, we need to be able to show that we have a properly supported and effective regulatory system that is able to identify and eliminate risks from foodborne illness, undercarried allergens or mislabeled food products. If the countries that we want to export to are not assured by a regulatory oversight, then exports will not happen. On Covid, the pandemic has once again highlighted the need to tackle high levels of overweight in obesity in Scotland, and, as our board has said, if obesity in Scotland's diet isn't tackled now after what we have learnt from Covid, when will it be? The cost to the health services treating long-term effect of poor diet are now watering £363 million to £600 million, and the total annual estimated cost to the Scottish economy ranges between £0.9 billion and £4.6 billion. This is the estimated total economic cost to Scotland, so it includes treatment of and other indirect costs such as property of your sick, absence, etc. An obese nation, which is where we are heading, is not going to be a productive one. Regulators are often seen as an inhibitor to the innovation enforcement bodies that are against the industries that they regulate, but I would like to think that that is not how FSS is viewed. We also know that consumers have a high degree of trust in our food system, precisely because we are an effective regulator, and, since we have left the EU, our role as the national regulator has become much more significant. Thank you very much, and I can move on to Fraser now, please. If you could possibly, we've got another in this session, if you could keep your opening remarks brief, because I'm quite sure that the panel will have plenty of questions for you after you've finished. Thank you. Many thanks, convener, and delighted to appear before the committee on behalf of the Scottish Whiskey Association. We are the trade body for the Scotch whisky industry comprising about 80 members and 95 per cent of the Scotch whisky production. I'm sure that many of the members of the committee will be aware of the strategic importance of the Scotch whisky industry to the Scottish and wider UK economies. Scotch whisky accounts for about 75 per cent of all Scottish food and drink exports and 21 per cent of all UK food and drink exports. We employ 11,000 people directly in Scotland. 7,000 of those are in rural communities and support around 42,000 jobs throughout the UK. The industry adds just over £5 billion of value to the economy annually. As with other sectors, the past two years have been very challenging. First, from October 2019 to March this year, the industry faced a 25 per cent tariff on single malt Scotch whisky in the United States. Those 16 months caused exports to fall £600 million in that period, a 65 per cent fall. Second, we had the impact of the pandemic, which saw global hospitality shut, tourism and business travel curtailed and exported to clients at their lowest point from a decade. Thirdly, as the UK transitions from the EU, with businesses having to find their feet, few customs procedures, the cost to some of the supply chain materials, particularly if smaller producers, have been rising. There are some positive signs, however, trade since April with the EU grew at its fastest rate than before the pandemic, growing up to 21 per cent in the first half of this year compared to last year. But exports remain 10 per cent lower than they were pre-COVID and pre-tarrers. This is a lost growth, and the industry needs to work hard to regain that ground, working with Governments across the UK and globally. Finally, with COP26, we would welcome the opportunity to spend some time exploring with the committee how industry and government can work in partnership to drive ambitious sustainability. Plans, while ensuring that businesses remain competitive and unburdened from complex and costly bureaucracy. The Scotch whisky industry, as some of you learned during our 100 days, to go open day earlier in the summer, has committed to being net zero by 2040. That will take a degree of partnership working between industry, government and the development of new innovations. We hope that the committee will look into that further as part of its work in session 6. We would be happy to host further fact-finding visits of the committee members as the new Parliament session gets under way. I am sure that we are all interested in a fact-finding mission to some of your businesses across Scotland. James, can I move on to you, please? Yeah, morning, convener. I am honoured to be with you this morning. I will be as brief as possible. Scotland Food and Drink, we are an industry body membership organisation. We have about 430 companies and organisations that are members of ours. The vast majority of them are food and drink manufacturers, and they will range from small artisan, new start businesses up to your long-established multinationals. The engineering of our organisation is that we coordinate a public and private partnership that we call the Scotland Food and Drink partnership. There are 17 organisations around the table across all the main sectors of our industry, alongside government agencies, and we coordinate the strategy to grow the sector in Scotland across the UK and around the world. We have been working on a recovery plan to manage the impact of Covid and adapt to Brexit. I have given evidence to the predecessor to this committee many times that evidence is probably marked by ambition, buoyancy and momentum. However, as Fraser and Jeff have alluded to, it has been the toughest 18 months, probably in 20 years, for the farming, fishing and particularly food and drink sector. It will be very much on a crisis footing. Certainly, as a result of Covid, those who were heavily reliant on exports found many of their markets closed overnight. The out-of-home hospitality market is worth about £90 billion a year in the UK that closed overnight, causing huge issues. Folding in on top of that was the impact of Brexit at the start of this year, the end of the transition period, which brought in significant new trade barriers with our single biggest market. Something of a perfect storm alongside that is that we have cost pressures in the supply chain, an incredibly competitive retail market in particular, and a country that is fairly allergic to food price inflation, so it is very difficult to pass those costs on the chain. The single biggest issue right now, if you talk to food and drink businesses, is the impact of labour shortages. Jeff has alluded to the impact that it is having on them in terms of recruiting vets. I have spoken to many MDs of food and drink companies the past couple of weeks, and I have never seen them as concerned about the potential impact on food supply of staffing shortages. They are being felt right from farm through to fork and fishing boat through to retail shelf. With a very real risk, that situation could get worse, because we are in something of a lull in terms of food and drink supply, and the grocery sales will continue to peak as they head towards Christmas time. The glass half full looks at it, and the upside of it is that there is a recovery plan in place. We have 17 organisations that are working in partnership, delivering a whole heap of projects. They involve many of the organisations that you are taking evidence from in this panel and the next panel, but there are also big challenges in what is proving quite a fragile food and drink supply chain in Scotland and the UK just now. The question that the clerk had asked around future areas of focus for the committee over this parliamentary session, I think that trade issues and trade policy and trade promotion are massively important now post Brexit and how we help to shape UK policy around that. I think that this journey to net zero is absolutely critical. As a partnership, we are going to be working on the next long-term food and drink industry strategy and would welcome the committee's views to help to shape that. I think that the lessons of the last 18 months have been about how we can put more resilience into the food and drink supply chain, which I think has certainly started to creep a little bit just now. I will finish my comments here. Thank you very much, James. I now have Professor Mary Brennan from the Scottish Food Coalition. Thank you, convener, and thank you members. I really appreciate the opportunity to represent the wider civil society organisations and communities. Formed in 2015, the Scottish Food Coalition is a coalition of approximately 45 civil society organisations, all working collectively towards a just transition to a fairer, healthier and sustainable food system that works for all. While a vision for a good food nation for Scotland is neither difficult to articulate nor, in fact, politically contested, what is difficult is just how messy, protracted and at times interrupted progress has been towards this attainable vision. Whilst there is some mitigation to be acknowledged as I highlighted by my other panellists for Brexit and the on-going Covid-19 crisis, what it has taught us all is just how precious, fragile and precarious our food system is and how urgently food systems transformation is required. As a coalition, we bring together a diversity of interests, goals and priorities across our member's organisations that represent public health and nutrition, environmental and nature protection, social justice, poverty, animal welfare, community action, workers rights, farmer representatives, community growing, health and social care and education. We also bring a broad base of interdisciplinary, internationally informed and practically grounded expertise. We have a network, really importantly, of geographically diverse stakeholders in all communities across Scotland and a community of practice who have lived experiences of how the current food system works against them, thriving as individuals, communities, enterprises, institutions and places. We as a coalition actively embrace the messiness demonstrating how barriers to systemic change can be knocked down by opening up, reaching out and listening to each other through honest and respectful partnership working. We ask difficult questions about our place within and responsibilities to our food system. We interrogate how public investment in food systems transformation can and will create and drive more resilient, prosperous and sustainable local economies and communities, including and especially those in our rural and island regions, improvements in educational attainment, enhancements in health, wellbeing and productivity of our people, animals, fish and land, reductions in greenhouse gas emissions on our pursuit of net zero and a thriving natural environment. We work to expose the different interests, paradynamics and resources available to different stakeholders and how these influences, who is heard, what sectors and markets are supported and the balance, importantly, struck between domestic and export food and drink priorities. We work really hard to amplify the voices and lived experiences of those so often unheard. We reach across the political divide and the multiple governmental portfolios, civil service departments and public agencies, impacted by and responsible to our food system. Through this, we are aiming to develop and working to develop evidence-based solutions to the wicked systemic problems preventing Scotland from committing to the good food nation bill and engaging in groundbreaking food systems transformation. Thank you very much and thank you all for your very informative opening statements. We are now going to questions that we have to approximately 40 minutes. We are going to touch on a number of themes, including good food nation bill, ambition 2030 and so on. How do you work together? You all represent different sectors within the food industry with different ambitions, but how can you work together to solve some of the issues that we are seeing and put together a coherent position that will feed in with the Scottish Government policies relating to some of the issues that you have touched on, such as healthy diets, social security, food poverty and so on? How can you come together to provide a coherent message for the Scottish Government to take on board? I think that what we have in Scotland is a good track record of collaboration. I think that there has been some limits to that, which I will explain very briefly. As I mentioned, we have this public-private partnership with industry bodies, so the Scottish Whiskey Association, we are taking evidence of food and drink federation in the next panel, and another 10 other industry bodies alongside the Government are coming together to develop the economic growth strategy for the industry. I would say that it is hugely successful that we have gone from a static industry to one of Scotland's best performing over the period of 10 years. Although that sense of coalition on working needs to broaden now, we have just heard Professor Brennan and Geoff talking about broader issues around dietary health, particularly net zero. The economic growth strategy has been successful, it has worked, and to be fair to the Government, it has worked as good partners of that. It has given the space to the industry to put forward the strategy and it then aligned our support behind that. However, if we are going to tackle net zero dietary issues, some of the fragility in the supply chain, I think that we now need to broaden that coalition. As we work towards developing the next strategy, that will be critical, but I think that we have a good foundation to build on. Very interestingly, it is a foundation that the Northern Irish are now about to model in terms of that partnership working. The Welsh have already started to do, and down south, the English are planning to do, through the food and drink sector council as well. It is a proven model, but it needs to move to the next stage. Can I ask Professor Brennan for the same point, please? Thank you, convener. I am really heartened to hear James' position there and looking to broaden the stakeholder base. I think that that is essential to hearing the range of voices. At the heart of all of what we have been talking about is that there are people, lots of different people—households, workers, producers, businesses—all who have a real stake, both economically and socially, in our food system. It is also our need to broaden not to take our eye off the economic side of things but to broaden the value that systemic change can bring to our social and environmental goals. I think that that is absolutely essential. The other aspect that I would like to note is how important it is that we think and reframe our thoughts around what we are spending on the food system and think of it more as an investment and how that investment can act as a local, regional and national multiplier, both in terms of local economies and in sustainable communities and in environmental gains. We have heard from you about some of the difficulties that there are. One of those difficulties that we have heard about post-Brexit has been in the past. We have looked at the difficulties in exporting, but one of the issues that has arisen more lately has been some of the concerns that there are about changes coming up to certification changes in terms of importing food as well and what that means for us. Can I ask you, if any of the panel—I do not know whether that would be James Withers or Jeff Ogill or somebody else—could comment on the issues that have been raised about that, please? I am happy to start and then Jeff will want to add that his team is very much at the cold face of managing some of the certification requirements, particularly getting products out of the country. However, as you rightly say, as of yet, the real controls on products coming into the country have not started. That has been a source of frustration to a lot of businesses who heard about taking back control of borders as part of the Brexit debate. In reality, it is the European Union that has taken control of their borders and has resulted in a huge amount of bureaucracy and paper and getting products from Scotland and the UK into the European Union. As yet, our competitors in the European Union have a completely free ride bringing products into the country. That will change from the first of October, where the first documentary checks will start, and then the first of January, the first physical checks on products coming into the country will start. The reason I suppose that there is something but a lamb bell around that is because we already have real challenges in the delivery supply chain as a result of labour shortages before we even start some of those checks coming in. If even half the pain is felt on the import checks, as exporters felt on products moving in the opposite direction, there will be real challenges. It will be interesting to see if those checks on imports are delayed yet again, because I would have questions in my own mind as to whether our border posts are fit and ready to deal with the level of bureaucracy that will be required on products coming into the country. However, at the moment, we have not felt any of that pain as yet. I will add to that. Obviously, we have an important experience already from the rest of the world. The issue here is one of volume. The other issue is about capacity on the EU side as well. If the EU has problems with vets, for example, then certification is a problem for them in terms of their exports to the UK. The issue is primarily one of volume and also our readiness in terms of having the required volume of border control posts, the necessary staff systems, etc., in place. It is fair to say that it is challenging. You will bring in for us specifically the issues around Cairnrym with Northern Ireland, and that is more complicated. There are issues and there are risks. If there are bureaucratic delays, that will stop food coming in and that does pose some risk. My other question was, and you have mentioned it yourself a number of times, the issues that Brexit has caused and other issues that have caused for labour shortages. I notice that, James Whithers, who has recently written to the Home Secretary and others saying that Brexit and the pandemic have accelerated the existing pressures on labour availability. We have now reached crisis point putting the growth, viability and security of many Scottish businesses in jeopardy with knock-on impacts for consumers. We need action now to save Christmas. Without being unduly alarmist here, can you explain what you mean about the risks that face your industry when it comes to Christmas and more generally some of the issues that you face as a result of labour shortages? I think that nine of the food and drink organisations that wrote collectively to the Home Secretary and to DEFRA and to Marey Gouge on his cabinet secretary here just last week in a letter co-ordinated by FDF, and you'll have David coming up in your next panel. In short, there have been underlying labour issues facing our sector, like many other sectors of the economy, dwindling, working-age population for a sector that is in rural areas, in areas facing the population, as you will well know. The massive challenges that Covid and Brexit have come together to really push us to a number of supply chains to breaking points, so 1.3 million overseas people left the UK during the course of the pandemic. Post-Brexit immigration rules make it extremely difficult for many of them to come back in, and certainly the immigration policy at the moment for the kind of jobs that we need cover for, that immigration policy is at best ineffective and at worst is deemed hostile by the very people that we need to bring in. The shortage occupation list doesn't cover many of the roles that we require shortages for, so that will allow ballet dancers to come into the UK, but it won't allow butchers to come into the UK. If you speak to any red meat business at the moment in Scotland, they will tell you that they have a massive problem with availability of that particular job, despite the fact that a trainee butcher in a Scottish red meat business will learn more than a trainee accountant at one of the world's big accounting firms, so it's not a wages and pay thing. I suppose that what that means practically just briefly on the ground. I'll give you one example. East of Scotland grows a brilliant farmer co-operative in East of Scotland. In recent days and weeks, they have had to destroy 2.5 million broccoli and 1.5 million cauliflower healthy and nutritious food, not because there isn't demand for it, not because shops don't want it, but they simply cannot get that product to market due to staff shortages and storages backed up. Food banks can't deal even as an option because it's perishable and because of the volumes, so we are already losing product. That will of course cost that business £1 million. As I say, this is a lull in the food supply chain calendar. As things peak towards Christmas, a shortage on farm, a shortage in the seafood red meat processing industry, a shortage of drivers, a shortage in retail, a shortage in hospitality and chefs in front of house staff, all combines to give some very real problems. The solutions are elusive, but the single most important step that could be taken is a home office move to provide short-term emergency Covid recovery visas at least for the next 12 months so that we could extend our recruitment stretch out into the EU. Thank you, James. You touched on one particular example of the broccoli and cauliflower, I think. That has been exacerbated by the crop all ripening at the same time also because of the nature of the season. We've had this year that these crops are becoming ripe at the same time as the pea industry are trying to freeze peas and so on, so I think you're absolutely right that you mentioned it being a perfect storm earlier on. I'm quite interested in the workforce argument. Certainly Brexit will have played its part. Covid is probably even greater with threats of lockdown, meaning that some overseas workers are actually leaving to go home and not returning until it's clear exactly where we are with Covid. We've got the ageing workforce, but one of the main issues that I see is that we don't have the proper people to do the jobs. I know that there are examples of that. With the shortage of workers, people are earning their pot of money far quicker because of the availability of overtime, and they're leaving the job mid-season, which adds more pressure. However, it's not a new problem. We've seen issues with workers for quite some time. Going forward, what plans should we be looking at to ensure that we have the workforce in the long-term? We're putting aside the very serious issues that we have with the workforce right now. How can we ensure that we have a workforce trained for the future requirements of the food industry? A lot of that rests on industry shoulders, so we'll continue to invest in fair work, the right conditions, innovative work practices, and you'll find processes moving to four-day weeks. The industry's got its own job to do in order to improve the attractiveness of the sector and debunk some of the myths around that, but I think that what will be crucial is an immigration policy that can reflect where there are particular shortages in particular roles and where we have structural unemployment. I know that there will be people coming back from furlough, and we clearly have people unemployed, but where those people are unemployed is not necessarily where the job opportunities are, particularly in rural Scotland, so there's a whole suite of things that need to be done. I would add into their Scottish Government support for automation and investment through grant funding, but it's going to be a whole mix of solutions. You're right, it's an incredibly complex problem that's not a new problem, but Covid and Brexit have pressed the accelerator pedal, I suppose, on the scale of challenge that we've got just now. I think that I'm going to address those questions to James. You're getting a good workout this morning and also Mary. I want to explore a bit the whole local food economy, and I'll just set it up a bit. We've all acknowledged that we're in the face of a climate and biodiversity emergency, and I believe that we need to move away from mitigation and start adapting. I'm really interested in the whole piece around local food economy, how do we start to shorten those supply chains and look for the opportunities in local food being grown locally and then being publicly procured? I mean, I've already heard from James the challenges of just labour shortages and that kind of thing, but what other things should we be looking at in terms of if we're moving in that direction, which has clearly been signposted, what do we need to be putting in place to remove blocks and make that more straightforward in something that's already very complex? Mary, shall I go? Yes, please, James. I think that one of the silver linings to the very dark cloud of Covid over the last 18 months has been the huge amount of support of the Scottish public and Scottish consumers for businesses in their area. I would say that the local food movement has taken a step forward, but it does emphasise some of the challenges in local supply chains. Getting product that might be produced very close to you on to your restaurant menu or on to your dinner plate can be a challenge. There have been long-running issues around local abattoir facilities, for example, which, with the cost of regulation, is extremely difficult to make sustainable. What I would say is that, within part of the recovery plan that's being developed, there are now 18 regional food groups around Scotland that now have an employed regional food co-ordinator, tasked with a whole range of things, but include building those links with the local hospitality supply chain. One of the challenges that we have is that the retailers, the big supermarkets, are a hugely important market, but it's a massively competitive market. The margins are very small. Part of the reason that exports have been so attractive is because of the ability to find a premium and additional margin in that. You'll meet a lot of businesses that will say, we trade in the UK for volume, we trade overseas for profit. If we can also bring those added value opportunities rule locally in the local area, that is another way of de-risking the industry and building greater resilience into the supply chain. Although the food supply chain did a remarkable job in a pandemic, our world turned upside down and, yet still, shells were stopped, the food supply chain kept moving. We have a very centralised system of food disruption, and often the most resilient supply chains are the shorter supply chains within their own communities. I think that continuing to invest in regional food groups to define their own priorities and to own that supply chain development in their own area is absolutely critical. The more that parliamentarians can do around encouraging people to buy local and support local, the more that we can keep that momentum going. I think that there's a lot of positive opportunity in the local food strategy, but a lot of work to be done. Just building on that, James, that's excellent, and I'm really glad that you mentioned abattoirs, because I was going to mention abattoirs. At the heart of this, Ariane, is thinking around the way in which we can leverage public food and public procurement as a real core baseline market and ensuring that that has agility and flexibility. I think that it's Jenny that you're representing from Argyll and Bute. Argyll and Bute has shown huge innovation in how they've responded in Covid to supporting and working creatively with their local suppliers on what is a very geographically complicated area. It's showing agility in lots, in contracts, in bringing and encouraging new suppliers, mentoring and supporting new suppliers, reducing the bureaucracy. At the heart of that is organisations that you're hearing from Colin Smyth later in the next panel. Are boundary spanning organisations, such in particular the wholesalers, who play an awful, a really important role in connecting and moving and logistically making it possible for local and regional supply chains to flourish? For example, we have been doing work with some in the north east of England, J.R. Hollands, an example of a company there who has worked incredibly creatively with the local authority in County Durham to be that boundary spanner, to bring the egg producers, the bread producers, the organic milk producers into their wholesale. They're originally a fruit and veg wholesaler and to be able to deliver for the local authorities. I think that local authorities are central to this. My experience with them is that they are really interested and really active and creative about what they want to do and how they can use the money that they spend to invest that money better in their communities. One last point, it's not all about food. That's an unusual thing for me to say. It is much about the people who you're employing and the money that you are spending on those people, the investment that you're making in their skills, in their careers, in the facilities, because that money stays in the local communities and it stays very local because we can get ourselves tied up. It's as much about the people as it is about the food and both are the magic that comes together. Thank you. We've got a flurry of hands from members now, but I'll go to Jim, who's got a quick supplementary on this, and then we're serious before moving on. Thank you, convener. James and Mary are really interested in the stuff that you're talking about there in terms of the local food supply chain. I'd really like to know how we build the resilience into that, but there seems to be a bit of dichotomy. One of the biggest export markets that we have is food and drink, but the international trade policy of the UK Government, how is that going to affect our ability to shorten these supply chains, keep that local touch to our food industry at the same time as trying to do deals around the world? Jim, there's a lot of moving parts to that question and you're absolutely right. To be honest, this is something that, as an industry, we are rapidly trying to get our head around in terms of the food and drink having been devolved to this Parliament for 22 years now, and yet suddenly decisions around trade policy having a massive influence on the direction that the industry goes. Now, Fraser is here and his organisation are absolutely at the vangards of trade policy and have been long before it was fashionable for the rest of us, but I think that the critical area that I would encourage this committee and the Parliament to look at in this next session is how do we develop UK trade policy in a way that reflects the particular priorities in Scotland and indeed Wales and Northern Ireland, where we have an industry that is of disproportionate importance to our economy compared to south of the border, where decisions that will be taken around trade policy in terms of agricultural imports and standards of production will have a massive impact on the viability of the sector here. I think that we need a new type of working between devolved nations in UK Government in order to inform a trade policy that is smart, that is about understanding the decisions that we take in how we deal with Australia and New Zealand, the Pacific Nations and the US will have an enormous impact on the viability of businesses and therefore their ability to meet the demand locally, the ability to build these local food and drink supply chains. I am concerned that, whilst the Trade and Agriculture Commission did a really good and really important report, I honestly do not know what has happened to that as yet. I think that the Trade and Agriculture Commission has been recruited, but we need the scrutiny of these deals through that kind of mechanism that can wrap in devolved nations too to happen pretty quickly because the decisions that are taken at DIT and Foreign Office at days around trade policy in the old play into that will have a massive implication on viability of businesses here. A smart trade policy can be done, which can identify opportunities, but, if it is not done, it could have unintended consequences. If we have learned anything from Brexit, it is the impact of not having enough scrutiny on deals and understanding the real-world impact of them before they actually take effect. I will move on to more serious, which has a question on this topic before I move on to Jenny. Thanks, convener. Just to follow up off the back of Mary, I am mentioning the role of public procurement and local authorities in the local food economy. I was interested to know what role you see public canteens like those in schools and workplaces. What role do you see them having in promoting the consumption of local food? I see them having a key role in promoting. Sorry, am I echoing? No, I am okay now. Apologies for that. I see them as playing a key role because I think that they can drive some of the priority, they can demonstrate what is possible. They are also incredibly demanding food service environments, so if you can manage to deliver under the constraints, both the financial constraints as well as the spatial constraints and the timing constraints, and if you can make seven-year-olds happy, then you have a really fighting chance to demonstrate what can be done. I think that they can showcase what is possible under a range of constraints, so I think that they are absolutely key. Again, it is seeing that investment. It is not a cost, it is an investment in how we can do things differently. I think that we have seen, and Argyll and Bute show this as have other local authorities, how important public food is as a core business, as a core contract to many local food businesses. It might not be the biggest part, but it is an important and relevant and often the better payers or the quicker payers for those businesses. I think that it is really important that public food becomes the showcase for what can be done without necessarily losing track of the economic value that we need to deliver. Just picking up on what James said there, the other really important thing from the Scottish perspective—and it happens whether it is regional, local or national—is to remember that Scotland is very different to the UK as a unit. I think that we have to be really strong and we have to be really clear about why food and drink is different in Scotland and why we may have to adopt different approaches. Part of the challenges around that is data. What do we know and what do we not know, and what do we need to know in order to make the best decisions, whether they are for the domestic market or whether they are there for our export and trade activities? I am very aware of the work that happened within Argyll and Bute. That was across the local authorities and also really strong local groups. Also Fraser included a lot of work with the local distilleries, but more widely across Scotland he highlighted the level of employment that distilleries have. I would also like to ask you more about what the distilleries' plans are with regard to sustainability, because clearly that is very important in emissions, not only just in electricity but also the heat that is provided, which I think is about 88 per cent of your usage. Thank you very much for that question. The issue of sustainability is really important across all food and drink businesses but across the wider economy in particular. Many distilleries have been in their communities for decades, sometimes hundreds of years, and being part of a sustainable environment and communities is really important for the industry and its long-term viability in terms of laying down and being around for generations to come. We have a really tight ambitious plan around sustainability to be net zero within our own operations by 2040 to make sure that we are being using water responsibly to really do a lot peatland. We only use less than 1 per cent of UK peat, but we recognise the importance of putting back and having an action plan around peatland restoration and making sure that all of our packaging is recyclable, reusable or compostable by 2025. It is really ambitious. Some of the challenges that you mentioned peat as one is something that we are really looking at in terms of where innovations can come about, where we can work in partnership. We have the green distilleries fund that is trying to help establish new innovations to try to find solutions around that. I think that some of the solutions will be community-based or dependent on different distilleries. That is something that we need to look forward to and we need to find the right innovations to help to address some of those challenges. Arrianne has a brief supplementary on that topic. It is great to hear the innovation that you are bringing about. I am from Murray, a whisky part of the world, and we have a very good train line. I am really excited about the idea of getting whisky on to rail. Have you been looking into how we go about doing that? A number of years ago, in partnership with Hytrans and Highlands and Islands Enterprise and others, there was a pilot project to look at whisky by rail. It is something that we can look at again. There are challenges around picking up from distilleries and getting it to the rail halt, and then getting it to the main ports and the distance involved in that, and managing the quantity. It is something that we have looked at in the past and will continue to look at in terms of viability. Obviously, the train line does not go right into the centre of the distillery area in Murray, but we are certainly looking keen to look at all possible innovations and uses to do that. It is something that we have looked at in the past and will continue to look at. I would be keen to support you in doing that, because if we can get whisky on the rail, it is really pushing towards getting just rail better, not as I hear what you are saying. We cannot do it all, but I think that we could do a lot. I really see the whisky industry driving innovation in terms of sustainability, climate emergency and so on. Is the way in which crops are growing? Again, in Murray, we use a lot of farmland for growing the barley for whisky. Have you been looking into innovation around how the barley is growing? Yes, working in partnership with the Scottish Whisky Research Institute and the International Barley Hub is being developed as part of the tea cities deal. We are doing a lot to look at where new barleys and cereals can be growing and how we manage that. Recognising the importance of that, 96 per cent of barley comes from Scotland. We are keen to look at how we make sure that that is being done in as sustainable fashion as possible for the long term. I will now move on to Beatrice, to follow by Rachael McHenryn. I would like to go back to the workforce issues, and Geoff mentioned the shortage of vets and hygiene inspectors. We have mentioned butchers. Mary has said that, going forward, it is about an investment in people as well as everything else that has been discussed this morning. On 2030 plans and the need to get more people into food and drink farming and fishing, that includes aquaculture, to bring in young people to make a career of their choice, how do you think that we can do that and how do you think that using research and intelligence as well, young people can see a good career ahead of them in the food and drink industry as a whole? I will answer that, given that my day job is at the University of Edinburgh Business School. I can contribute to that. It is a really important issue, because often we have focused on more of our rural colleges and our agricultural colleges, but that is where we develop the skills and the graduates. Further education and higher education have a huge role to play, including business schools. We have 400-500 students a year going through our undergraduate programmes who are looking for exciting, interesting careers, which I know are offered by the food and drink industry, but they are not captured early on in their university or further education journey. I think that there are definitely innovations around really interesting internships that will bring young workers and young graduates, young students, into the places where we need them and give them a taste for and a real passion for the food and drink industry and also to get them outside of the cities. I love what Jeff said, that they could earn more being a butcher than being an accountant. I have a lot that go into accountancy. I think that it is about framing and setting what this lifestyle and livelihood would look like and how it can feed into their values. Remember, young graduates now are very value-driven. They are less driven by just the salary but the overall value and package that is being offered to them. I believe passionately that the food and drink industry can and should be doing more with further education and higher education, and not just in those that are learning specific agricultural and food skills, but also with the broader business and social science and a wider graduate base. Now we move on to questions on automation, health and food from Rachel. I have lots of questions but I am going to really try to narrow them down. I visited the James Hutton Institute last week to look at the vertical farming and hydroponics. I just presume that that is something that is under discussion and as part of the Scotland's Food and Drink Alliance organisations that are actually looking at producing food with low-carbon output and to meet net zero challenge. It is really just a wide question of how that fits in with the skills challenge, the labour challenges and shortages and the future of food production. My second point, which I will roll in here, is specifically for George Ogill, if possible, which is around Natasha's law, which will be rolled out on 1 October. I wondered if the industry is ready for that. There was some scare mongering that businesses might be prosecuted if they did not get their labelling right, and I wondered if you had any comment on that and whether the committee had a role to play in ensuring that it was rolled out properly, bringing businesses along. We have worked quite hard with industry in terms of preparation for the implementation of Natasha's laws and pre-packed food. We have done a lot of work with industry. I can assure businesses that the default position is not to go straight to prosecution. In any enforcement around food law, there is a hierarchy of enforcement, which, with the first point, is advice. When it comes to application of law, if there are infringements, and obviously it depends on the nature of the infringement, and the issue is really around the pace at which we move to that. As it happens, we do not have the legal powers, I do not think initially anyway, that still needs to be developed. Certainly, the approach is always to provide advice and support first. Only if you get continued issues, do you then escalate in terms of enforcement? The importance is to try and get compliance. Enforcement is one of the means in which you get compliance, but it is not the first means. James, would you like to come in on that, please? I just wanted to come in on Rachel's question in particular around the role of science and research in the future of the sector, because it is absolutely right. It is a critical point, and the one thing that we are blessed with in Scotland is having well-class research institutes and you reference the vertical farm, the work of the Hutton, and right across different institutes across Scotland. They are part of the partnership work at the moment, so the safari institutes, the six institutes are part of that, sit around the partnership board table. I think that there is a lot more that can be done there, particularly in trying to bridge the gap between science and business. There are too many businesses in our sector that go to the scientific community once they have a really bad problem, as opposed to doing it in the start of the business development journey. Interface has done some really good work in bridging the gap between business and the higher education institutes. That needs to stretch into research institutes as well. I think that there are small things that could be done that could make a big difference. For example, having scientists in residence support, where you might have scientists going into manufacturing businesses, just to look at where there might be opportunities to improve efficiency, improve productivity, reduce the use of resources, etc. There has even been talked about potentially funding and some kits that you could put in mobile vans. Given that businesses find it difficult to find the time to get out and get into research institutes, can they go to them? I think that there is a huge amount that can be done. Scotland's general draw on UK research funding policy has been poor, to be honest, and we need to get better at doing that. Part of that is down to the fact that we are more SME-dominated. A lot of the academic bodies often go, as a default, to the really big multinational food businesses. We have less of them in Scotland, except for probably the whisky industry and, to some extent, the agriculture industry. We need to get better at pooling businesses together and have common problems to look at bidding for innovative UK funds, for example. There is a bit of work industry needs to do on that front. I am really interested in a few things that you have had to say in terms of future proofing, particular practical implications going forward. In regards to the here and now and what we can do until we can implement those practical changes, looking back over the past 18 months, there has been quite a vast diversity in certain areas and in sectors. For example, in the whisky industry, we had hand sanitiser. The fishing industry was more of a boat-to-plate-type thing and it missed out on that shelf. We had more fish vans and the diversifications that we saw during the pandemic and the export issues due to Brexit really had that localised issue. I was just wondering if any of those diversifications have springboarded ideas that will be taken forward by the industry and by sectors. It was Geoff who mentioned that public confidence is really strong. I was just wondering if it was because of that local aspect and the diversifications, has that maybe had an effect on that? As James said earlier on, the confidence in the food system from what we have seen with Covid in particular has not diminished. Certainly, when we did consumer analysis prior to EU exit, there was a high degree of confidence from consumers in the food systems and a desire to retain that. The issue for me as a regulator is not around diversification and development of the market. There are many reasons why that is a good thing. I think that what needs to underpin it, and this goes back to some of the points Mary made around the food coalition, is understanding an education because food safety is critical to that success. What we know from the variety of food scandals we have had is that consumer confidence can diminish really quickly. I mean horsemead confidence in ready-to-eat products dropped by 46 per cent overnight. Consumer confidence and trust is there, but it can be quite fickle and it does not take a lot for it to change. For the diversification, what we need to also think about is what the education and food system support is and training for businesses to ensure that food is safe. Otherwise, that confidence will go very quickly. Thank you, convener. I agree with what Geoff says about consumer confidence. One of the challenges is that the smaller you get manufacturing units, the more challenging it can be to manage the cost of regulation, notwithstanding that, the regulation is critical because our brand and confidence is everything. It is not often that you get industries that want to embrace the regulator, but in this case, that work is absolutely critical because it underpins everything that we are trying to do in terms of operating at world-class levels, and we probably need to race to the top on that front. On the point of diversification, it is an absolutely valid one. One of the things that was very noticeable in Covid is that hundreds of businesses became e-commerce businesses overnight. They suddenly had to find a way of getting products from their drawers straight to consumers, bypassing the normal routes, selling through hotels or bars or restaurants. That happened awfully quickly and accelerated what was a longer-term trend anyway. Again, support for companies to invest in e-commerce capability and their web development particular SMEs can be really critical. Part of a good e-commerce function is having the goods behind the scenes chain, a good back office that can consolidate products and get products moving around the country in the right way. We have seen a massive leap forward in that diversification, and that has helped businesses to de-risks them too. They are less reliant on a few big customer accounts in order to keep the money coming in. I think that continued support for e-commerce and direct routes to market will be critical and could be a really positive legacy out of some of the trauma of the past year and a half. Just a couple of questions from myself before we close. Whilst I recognise, as you said, James, that the food industry is SME dominated, and we have some fantastic examples of artisan producers and selling online and adding value to products and whatever, there is still a vast amount of product that needs to be processed and lands on our supermarket shelves. Do you believe that there is an issue with a lack of capacity—or not capacity—a lack of choice? We have only a handful of meat processors, we have a limited number of abattoirs, and we know that we have a limited number of supermarkets. I believe in the United States, and the issue is that 85 per cent of all the food that is consumed in the States comes through about five major supermarkets. Are we facing the same issue here? We have seen issues with abattoirs and the pig industry. We have a very limited number of meat processors in Scotland. We have a very limited number of milk processors, and we have seen the demise of local creameries. Is that something that we need to look forward to addressing in the future? Absolutely. The fragility of the supply chain that I mentioned is a product of the fact that we have seen a massive centralisation of food supply. There are about 24 food and drink companies that will account for about 70 per cent of food and drink turnover in Scotland and a very small number of buying desks that will account for the vast majority of food sales as well. Part of that is some fundamental questions about a cheap food system that we have across the UK. The UK sits only behind the US and Singapore in us spending the smallest proportion of our income on food. That cheap food culture has led to increased centralisation. In the sense that it has been staggeringly successful, we have never had more choice, aside from current labour shortages, never had more choice at an affordable price. However, there are massive issues about the potential fragility that is created because of that centralisation, because more and more power goes into fewer and fewer hands. The local food market helps to de-risk that, but it is something that would be very worthwhile for the committee to look at. There are some cautionary signs at the moment that it does not take much to rapidly destabilise a just-in-time food supply chain, and that is completely accepting that we still have massive issues of food poverty and those who cannot afford good nutritious food, too. Jeff, have you got any comments on the process and capacity? Well, to some extent, it is determined by what the approach that Governments will want to take with regard to food supply source. At the moment, I think that we still import more than in terms of food supply. Ultimately, it comes down to the economic and political question around self-sustainability, I suppose. If you move in that direction, that dries what your policy would be with regard to internal food production. Okay, thanks. I am very, very, very small supplementary from Jim. Before we go to the final question. No, I was to make sure that I got a question then. That was all. It was not a supplementary. Is that the Good Food Nation bill? Yes, absolutely. Good Food Nation bill is one of the last questions, so go for it. Thank you for that, convener. I apologise for the confusion. I have thoroughly enjoyed this conversation. As some of you know, I have been involved in food production and the hospitality sector for many years. I am hugely excited by what we can potentially do. We have undoubtedly got some major challenges ahead of us. Brexit, Covid, the shortage of supplies, the things that are happening right now. We have got to face those challenges, but ultimately the Scotland food and drink industry is a massive bonus to Scotland's economy and Scotland's people and Scotland's culture. What role do you see and what expectations do you have as a panel for what the Good Food Nation bill can deliver? Fraser, do you want to start? I think that this is really focused on probably better answered by some of the other panel members, but clearly we all want to make sure that we have access to high quality food and drink and that people have trust in where it comes from and the provenance around it. I think that building on that Fraser, absolutely. I think that it is also about people having access to and being able to afford the foods that we are wanting them to eat. At the heart of it, I think that it is about holding ourselves, whether that is government, local authorities, businesses, institutions to account and setting ourselves targets and ensuring that we progress. Building on what Jeff Scott said earlier on, we cannot continue with the obesity levels that we have. We absolutely have to address the health of the nation and food is a fundamental part of that. I think that the Good Food Nation bill and the calls that are being made from a framework perspective and for accountability within that are absolutely essential for us to deliver on nutritional outcomes, environmental outcomes and social outcomes, and that is the magic of what this framework bill can deliver. It is complicated, it is messy, but the collective and the systemic focus of it has the power to make us a healthier, weller, more sustainable country and people. I do not think that there is much more to add to what has already been said. I think that the issue for us as a nation is really the diet. The diet is our challenge and going forward, if we do not turn that tanker, we are just going to suffer the economic and health consequences of doing that. Any vehicle that enables us to shift the current trajectory is something that we really need to consider quite seriously. Just finally, I want to go round the panel again. One thing that he always comes down to is budget. We know what the Scottish Government's policy objectives are, but do we have adequate funding in place for the food and drink-related policies in their objectives? James, could you touch on the other question and then I will go round the panel again to close the session, but if you make some comments on the budget for food and drink. Yes, on the budget. If we go back probably to 2005, 6, 7, there was no food and drink industry development budget at all. There was no budget line in the rural affairs portfolio. There now is something in the region of £10.5 million. Against the context of a £15 billion industry, it is enough that it has been making a transformational difference, and there is a much broader set of support that goes into farm policy, grant schemes, etc. However, I think that it is worth thinking about the scale of opportunity that we have for growth, the scale of recovery that we need to drive and the opportunity to make some huge and beneficial impacts on local communities as to whether that budget line should be moving north, given the scale of it just now. I think that that is worth looking at. Do you want me to comment on the good food bill, or would you rather move on? You can give your comments then. Okay, just very briefly. I have questioned a number of times as to whether the good things that have happened in terms of the food and drink sector in Scotland, in order to strengthen them, do we need a change in the law or do we need a new law? I have struggled to come up with a legal change or a law change that is required, but I have warmed to the concept. As Meri has said, the idea, in particular, of putting an illness on local authorities to report against food policy is a good thing. I think that it will focus minds on issues such as public procurement, it will focus minds on how they are supporting local food groups in their areas, and the concept of a right nutritious food enshrined in a lot of UN work is difficult to argue against. I do not think that it is a game-changing, but I think that if it focuses the mind on food policy, it can only be a good thing. Thank you. Meri? Just building on that in terms of the budget. This is not my specialist area, but based on what we have been saying, further investment in skills and careers and building the attractiveness of the industry is central to addressing the challenges that we are facing with people. It is also referenced in the notes for this meeting that the coherency across portfolios and across governmental departments is recognising the interconnectedness on how we are using and spending money or investing in social security and free school meals, in the child payment investment in SMEs, in core infrastructure, whether that is transport, whether that is green energy, etc. Also, as Jess said, treating the outcomes of poor dietary health, we have to see it much more holistically, while also fight to maintain and increase the share that the food and drink budget has to drive the sector forward. For us, one would be ensuring that food and drink is embedded in the promotion of Scotland around the world, recognising the reputation of Scotch whisky and the role that plays in Scottish tourism, where two or three visitors to distilleries would usually be from overseas. Support for innovation to find solutions around sustainability, heat issues and so on, and then infrastructure addressing issues like the rest of the vehicle, and of course, ferries would be helpful too. Thank you, and in conclusion, Geoff. Yeah, just two quick points. From an emphasis perspective at the moment, our budget is okay. We'll have to see how that goes going forward. From a local authority perspective, particularly around environmental health, there are particular issues there, resources, some of that issue, but I also think the challenge for us as a regulator is also around innovation and how we use, for example, digital and another means to ensure we have an effective regulatory system. So I don't think it's just resources, it's also about how we actually regulate as well, which is going to be key. Thank you very much, and I'd like to thank you all for your comments, and we'll certainly take them on board when we look forward to put our work programme together. It's been a very helpful evidence session, and we'll briefly suspend the session to allow you the witnesses to change over, and we'll restart at 10.15. Welcome back, everybody, and welcome to our second panel. We have the panel today. We've got David Thompson, the chief executive food and drink Federation Scotland, Martin Reid, the director for Scotland and Northern Allian for the Road College Association, Peter Chima, chief executive, and Dr John Lee, head of public affairs from this Scottish grossers federation, and Colin Smyth, the chief executive of the Scottish Wholesale Association. I'm going to invite David Thompson to make a very brief, and I'll stress a very brief, where we're limited to an hour this morning. So a brief opening statement followed by Martin, Peter and then Colin. Good morning. Good morning. Thank you, and I will be very brief. So the Food and Drink Federation is a trade association of food and drink manufacturers in Scotland. Representing Scotland's largest manufacturing sector employs 47,000 people and has a turnover of around £11 billion. We have membership of over 900 members across the whole of the UK, and in Scotland we represent many famous Scottish names and also UK and international businesses who manufacture in Scotland. I was asked to talk about key issues and some key elements for the committee to consider going forward. The key issues, as we say just now, are a very fragile state of the industry, roped by the continuing exposions of Brexit, and we're not through that process yet, significantly affected and changed by Covid, and facing at the moment a labour shortage that is unprecedented. At the moment, there are a lot of things where the industry feels fragile. However, we have a strong background, a strong baseline in growth in Scotland, and a robust industry that managed to get through Covid and change and adapt for that over the course of the last year. I think that there are probably four or five things that I would highlight. Food and Drink Federation works on behalf of the wider food and drink industry in Scotland to do two things. The first is to support careers advice through our future in food programme, and the second is to support small and medium-sized enterprises to reformulate through our reformulation programme. Both of those are supported in different ways by the Scottish Government, and those are going to be key things as we move forward, and in particular when we talk about some of the key issues that are coming forward. The first one is obviously around health, obesity and potential health regulation. The Scottish Government had previously proposed health regulation, and it has sensibly dropped that in the face of the pandemic, but we await what comes in the programme for government. There are also new health regulations being brought in place in England and how those regulations impact on each other, impact on businesses in Scotland that are going to be critical to understand. The second area is around environment. We obviously have the introduction of the deposit return system, but we also have the race to net zero. The food and drink industry is an important part of the discussion around the race to net zero, and that has to be one of the key things that the committee considers. We have also got trade deals, and I know that you have talked a lot about that in the previous session, so I will not go into that in detail. There are two other things that I would probably highlight. The first is the impact of our new status as a UK out of Europe. Things such as the internal market art, differences in regulation in different parts of the UK will be important for the committee to understand that and to monitor what goes forward. In particular, as legislation begins to need to be brought in in terms of what would have been decided at EU level before, then, obviously, food and drink has a significant amount of technical and health regulation associated with it anyway. Again, the committee will need to understand how it is going to interact with those wide-ranging but very technical changes to regulation that are due to come forward. I will stop there, but there is a lot more to talk about. I move on to Martin. Good morning to everybody on the panel. The UK logistics sector employs 2.54 million people. It is worth about £124 billion to the UK purse. 98 per cent of the goods of the UK will spend some time on the back of a truck, and 85 per cent of the UK operators are SMEs. I have two bits for context. The RHA has around 9,000 members in the UK, 900 in Scotland and Northern Ireland. Although we have a membership of 90 per cent of the motor transport top 100, 80 per cent of our members have one to 20 vehicles. In terms of scale, there are 76,000 operators licensed in the UK. Scotland has about 5,500 of those. 2,400 are standard national. Only 555 are standard international and the rest are on account. The vast majority of goods that are moving in the UK policy sector are still within the UK. The biggest ticket item that we have just now, and as well as publicising it, affects all the other supply chains, is our driver shortage. B Brexit estimations were that there were between 50,000 and 60,000 drivers shot. At that time, there were about 15,000 Eastern European drivers operating in the UK. As James pointed out in the morning's session, a lot of those people have gone back and it is difficult for them to return under the current regime. We have an ageing workforce as well. The average age of an ACV driver is 55 years old. Only 2 per cent of UK drivers are under 25 and only 1 per cent are female. We have a lack of diversity. We have an ageing populace and we are reliant on new entrants every year to cover those who are leaving. Normally, a DVSA would do roughly 75,000 HDV tests in a year, and the pass rate is just above 50 per cent. Last year, because of the restrictions through the pandemic, it was only able to do about 35,000, so 40,000 HDV tests shot last year, which puts us in a position. People have used the phrase perfect storm quite regularly, but what has happened because of Brexit and the pandemic has made an existing problem exacerbated further. The knock-on effect is that our members and ACV companies right across the UK are moving goods for the construction sector, the food and drink sector. You name it, we are part of the supply chain. When there is a deficit in the amount of drivers, it means that there is a deficit in the amount of deliveries that are happening. There are very few supply chains that are unaffected by the shortage that we are experiencing in our industry. Good morning, convener. Thank you for the opportunity to provide evidence. We were formed in 1918 to ensure the supply of essential products in the aftermath of the First World War. The Scottish Crossroads Federation is the national trade body for convenience store industry. A short opening statement to the committee will touch on three areas. 1. The convenience sector in Scotland. 2. The SGFs and Scottish Governments go local programme that connects with local retailers and local suppliers. 3. The challenges of the supplying island communities. The convenience sector has 5,000 convenience stores in Scotland directly employing 42,000 people. The value of sales annually is about £4 billion, and the sector contributes £530 million to Scotland's economy each year in gross value added. Over the course of the pandemic, the number of stores in Scotland has remained stable. However, 5,000 jobs have been lost. Our working assumption in relation to the reasons for that is in order to stay open for business, stores have had to cut jobs. Convenience stores are at the end of a complex supply chain. Most convenience stores in Scotland have a close relationship with a large wholesaler. That allows them to stock a wide variety of products from a wide range of category. The connection with a wholesaler's partner supply chain has enabled convenience stores to remain relatively well stocked through the pandemic. However, to remain competitive, convenience stores have had to maximise the selling space within stores. Stock is generally controlled on a just-in-time and with it being increasingly facilitated by a tablet and an app technology. Another aspect of ensuring competitiveness is the significant growth of food-to-go offerings within convenience stores. That is vital for convenience stores to build a strong business relationship with local supplies, bakeries, butcheries, dairies and so forth. The food service company is also for catering-style ingredients. That means that more and more parts of the supply chain have become embedded within the convenience store. The overall effect of that has meant that convenience stores have diversified their range of suppliers. Additionally, as owner-occupied businesses, convenience stores have become very flexible. They make decisions quickly and respond to changing customer demands. Taking that together with things that have enabled the convenience stores to fare relatively well during the pandemic. The connection with the local suppliers will grow as an importance over the next few years. That is why, in partnership with the Scottish Government, we developed the Go Local programme. The Go Local programme was designed to aid the economic recovery of the regrowth of Scotland's food and drink sector by increasing the sale of Scotland's local products in the convenience sector to help to mitigate losses in other channels as a result of Covid-19. It aims to support the convenience stores throughout Scotland to provide a dedicated, long-term display space for locally sourced products with a bias towards fresh and healthy, coupled with enhanced consumer engagement and supporting retailers that achieve that through a Scottish Government much-funded scheme. The pilot was launched last year on 1 December 2020, following a robust selection of process that chose 10 geographically and demographically diverse stores across a range of fascia groups to prove a proof of concept. Each of the stores received grant funding to enable them to maximise the range of Scottish products that they offer to customers that, in turn, enable stores to support local Scottish producers and give those businesses a vital route to market. Much as there are many common product ranges across stores, the programme deliberately was flexible to ensure that areas developed and ranges introduced are right for each store. That approach really allowed us to deliver a diverse range of products from in-store butchers to food-to-go operation. The trial has been hugely successful and resulted in a 34 per cent increase in the number of local products stocked, thanks to a much more space-dedicated system and a 40 per cent rise in sale of local producer shops that took part. Across all stores, the performance of Scottish products outperformed the rest of the store. The data that we gathered has been quite significant and the participating stores clearly demonstrated the value of the initial investment, particularly in creating a multiplier effect, which other colleagues talked about in the morning sessions, which benefited from the entire value chain. The average annual local multiplier effect per store was roughly £694,000, based on retail scanning data that was provided for all Scottish products. The average local multiplier increase of just over £220,000 per store and just under £160,000 of which was go local compliant products. The remaining £64,000 increase coming from non-compliant products, which is anilintending benefit from the focus on Scottish products. The annual local multiplier increase of just under £1.6 million on compliant products, based on applying the average to 10 stores. Extending that over the life cycle of the six-year programme, the local multiplier benefit is just under £9.5 million. We have seen the further benefit of just under £4 million from non-compliant products. What are the key learnings from all of this? I am going to have to stop you there. I am sure that some of the topics you have got to cover will be brought up in questions, so we are just tight on time. I move on to calling for a brief opening statement, and then we will get on to some questions, please. Thank you for inviting us to the committee this morning. The Scottish Wholesale Association are the official trade body of Scotland's food and drink wholesale distributors. Prior to the pandemic, our sector was worth £2.9 billion and employed over 6,500 people directly. Wholesalers are the wheels to the Scotland's food and drink industry, as supplying the 5,000 convenience stores that Pete's just talked about, as well as supplying into the 30,000 hospitality, tourism and leisure businesses, as well as all of Scotland's public sector hospitals, schools, prisons and care homes. 90 per cent of our sector is made up of Scottish family-run SMEs, and when the pandemic hit, the devastating impact on them. Some were operating only 5 per cent of pre-Covid sales right up until April of this year, when restrictions began to ease. That was particularly evident in the more rural and remote parts of Scotland, and where they were more heavily reliant on tourism. It was also particularly noted within the on-trade wholesalers that purely service licensed hospitality venues. Even with the economy starting to fully reopen, our fifth wholesale market report in July showed that 37 per cent of members were still trading at a loss. The Scottish Government's Wholesale Resilience Fund, awarded to many wholesalers last December, was genuinely a lifeline to its survival. However, just as members were expecting customers to reopen in January, the economy remained closed, and no further financial assistance has been forthcoming for our sector. That is despite real need among some of our wholesale businesses. To combine matters, wholesalers are now being hugely disrupted by the wider supply chain issues that previous speakers have spoken about. Members are facing their own staff recruitment challenges, particularly drivers and warehouse staff, but there is an even greater impact on food availability coming into our warehouses and act as the largest for those customers that we supply. Those are being disrupted as a result of workforce gaps elsewhere in the supply chain. Despite the challenges, SWA has embarked on a rebuild strategy for our sector. That includes the creation of a local supply chain education and training programme for the producers and suppliers selling into convenience stores that people talk about again in the hospitality sector. We have set up a decarbonisation of the wholesale industry project. I would be happy to share more information on both of those projects with the committee, and I invite the committee to come and visit wholesale depot near you and see for yourself what we do. That is me. Thank you very much. Thank you, Colin. I thank you all for your introductions. We will now move on to questions for members. We will start with Mercedes, who has a question on access to labour within the food and drink supply chain. I am sorry, but it was a question about rural areas and islands. I just wanted to know if you are aware of any ways in which island and rural infrastructure can be improved to ensure compliance with animal welfare, environment and biodiversity standards, and how best that can be supported by the Scottish Government? I will be honest. I do not have an answer for you there. It is not something that I have any kind of level of knowledge about there. I do apologise. That is quite all right. Would anyone like to raise their hand if they would like to address that question? No? We will move on to another question on the labour supply and that will stimulate some conversation. We have heard about the issues with haulage. We know that it is not unique to the United Kingdom, where we have also got examples of Poland. It has about 150,000 drivers short in Germany, so the UK is certainly not unique in facing problems with haulage. What interventions do you think the Scottish or the UK Government could make to address the short-term problem? What short-term initiatives could see a reduction in the issues that we see with haulage at the moment? You touched on tests. I know that that is a reserved matter, but social distancing or whatever, when it comes to test centres, is down to the Scottish Government. Speed limits, tachygraph hours. Where do you see we can make some quick improvements to address some of the issues? We have put a number of suggestions into the Government. First, I do not think that the drivers hours are necessarily the way ahead, because all you are doing is increasing the workload for those who are already under stress and underrepresented. That is not necessarily the way ahead. As the panel mentioned this morning, one of the issues that we need the Government to look at is the shortage occupation list. We also think that, in accordance with what James Withers mentioned this morning, that a short-term visa would allow intervention or allow some of those who have left to go back to Europe to come back and work while we are effectively trying to grow our own wood, as it were, because that process all takes time. We have also asked the Government to look at the existing youth mobility scheme, which allows non-EU youth to come in and work here for a period of two years. We feel that, if that could be extended to EU workers as well, we could potentially get a small influx of drivers who could help potentially for a short term. I guess that those would be the short-term measures that we are asking for. Another point would be that the industry pays an awful lot of money into the training levy, but only about 10 per cent of that is drawn down. We need a review of the training levy and to see how that can be best used at the end of the day. There is an awful lot of training going on. A lot of companies all across the UK and Scotland is no different are looking to train, but that all takes time. As we have mentioned before and was mentioned in the morning call, there is a problem of a media stage now with existing orders that need to be filled. It is directly to Martin. In your introduction to the statement, you said that normally 75,000 HDD drivers would be taking the test, whereas 35,000 due to Covid were taking them. Can I ask if you have fed into the UK Government consultation through the DVSA on rolling the rigid and arctic testing? How quickly do you think that, if that consultation is successful in terms of rolling those two tests together, it will feed new lawy drivers into the system? We are feeding back on that. The consultation is still live just now, but we are feeding back into that. We are of the opinion that using or amalgamating the C plus E or being allowed to go to C plus E without the need to do C class first would certainly speed things up for the first instance. In terms of the training side of things and the safety side of things, which nobody wants to compromise on, no trainer worthy salt would ever put somebody through for C plus E if they had concerns of them while driving a rigid. We would definitely speed things up on the safety side of things. Other parts of the consultation were keen that they do not bypass B plus E, which is obviously for towing caravans, plant, et cetera. We cannot compromise on the safety side of that. There are ways of speeding that up. Delegated testing is another thing that we will look at for perhaps the reverse part of the training that could be done at the trainer site rather than the DVSA. There are a number of things that we have in that consultation response. That is a key thing. We also feel that we should be prioritising atv tests over car tests just now because, at the end of the day, this is a real shortage that is affecting all supply chains. We need as many hands to the pump as we can get to get people through their tests and get available slots through. I would like to ask Colin about the supplies to wholesalers, particularly in rural and island areas. We saw at the beginning of the pandemic that there were situations where supplies weren't getting through, particularly if you were at the end of the supply chain. I wondered what the experience was at the moment. I have heard locally of supply issues, so I wonder if you could expand on what is happening at the moment in terms of getting supplies to the smaller wholesalers. Frustration has sometimes expressed that you can see the goods that a wholesaler is trying to bring into the community and you can see it on a supermarket shelf, so I wondered if you had any comments on that. No, I thank you, Beatrice. It's good to see you and I know that you are engaged with those in your local community, supplying the public sector, as well as the local community store. You are right, Scotland. As a country, as it is defined in the supply chain, we are reliant on the goods coming up from England or even further afield from Europe and coming through the ports of Dover. It's always been a bit of a chance, but Brexit and Covid have compounded that further. Even more so, those that are based on the furthest ends of Scotland into the highlands and up into the islands, just to give you a sense of our sector. As I said, 9 per cent are small Scottish family SMAs. We operate around 100 from 115 depots located across Scotland, but if you look at where they are located, 50 per cent of our depots are located within the central belt of Scotland—that's from east through to west—and 14 per cent are based up in the highlands and islands. That becomes a commercial decision for the suppliers. Where are they going to send the goods? Is it the 56 per cent where they can be a guaranteed volume and capacity of filling vehicles? Or is it the 14 per cent that don't require as much because there's not as many mouths to feed and areas that are heavily reliant on tourism where there are now isn't any? The unfortunate piece is that the 14 per cent aren't getting the supplies. Pre-Covid availability into our sector as a whole was running about 98 per cent, so if you were ordering 100 cases, you would expect to receive 98 of them. Since Covid and especially EU exit happened, that average has now dropped to around 85 per cent to 90 per cent in the central belt, but up into the highlands and islands, availability has dropped to between 70 per cent and 80 per cent. Compounding that is the fact that the cost of service to local rural communities is a lot higher, so suppliers are increasing their minimum order of values or their minimum quantities to those islands to maximise space in the vehicles and reducing delivery times. Where they might be used to get a delivery once every fortnight, it's now once every month. The problem that highlands and islands have got is that if availability is only 70 per cent of what they are asking for, they are now not able to replenish that and fill that gap for another four weeks, so there is a double amount of problems. It is a concern. Is it going to get better or not? It is probably going to get worse before it gets better, especially as reliance on the goods coming up from England and the pressure of bills opening in England is now going to be going back. It's a real worry for us. Just a small supplementary on that from Rachel. Colin, on the logistics and the warehouses, particularly Bellshill and Central Scotland, has there been a problem with pickers? Yes, very much so. We are not immune to the problems that our HA has just spoken about. We have a shortage in drivers, but we have also a shortage in warehouse staff. Since March, we have had basically a leaky bucket. We have had a shortfall in drivers of about 13 per cent across the sector, but we are now also struggling to find warehousing staff. It is not because our sector has been reliant on EU nationals, which have now gone home. The economy is looking for employees and people are moving to other sectors and other industries. Availability in the Central Bellshill Glasgow area is around 20 per cent and Edinburgh is running about 30 per cent of warehouse staff. Interestingly, we are not so much affected up in the more remote areas of Scotland, either by a driver shortage or by warehousing staff, because there is not the same opportunity for people to move around so that people tend to stick. I know that, as businesses are starting to come back in tourism, they are going to be looking for staff. There is only a finite number of home-grown employees available, so we have shortage in staff for warehousing and drivers. We move on to Jen for her questions. Great. Thank you very much. That was quite a dark picture that you painted there, Colin. Living in an island, I absolutely know how important our local shops are. They are absolutely central to rural communities across Scotland. Throughout the pandemic, they showed their fleet of food, I suppose, by changing where they got deliveries from and perhaps getting more local and working with different people and suppliers. I am interested to know how you will continue to ensure that that happens, given what you have just said, Colin. We have also had start warnings about Christmas. If we are in this situation just now, we have heard from the last lot of evidence, I am interested to know what you are putting in, what improvements you are trying to make to help in that situation. Thank you. The wholesalers have always been food, especially the smaller ones, that are more nimble and are able to adapt and try and get supplies from other sources. However, it is difficult that the same suppliers buying a local SME wholesaler is a multinational or into the supermarkets. Where is the preference of sale going to go to? Is it going to go to the larger multiples, the larger national wholesalers or the smaller SME wholesalers? Many of our members did pivot at the start of Covid to direct to consumer to help the local communities survive and to help sell the stock through that they were lumbered with, with the closure of hospitality. I certainly do not have the answer necessarily for how we are going to ensure that we have enough turkeys or other Christmas delicacies. That is in the hands of the producers that we are reliant on and that they have the difficulties in producing those. In terms of local supply chains—we will come on to that—I spoke about that local food supply chain project that we are doing. It is about ensuring that we are more engaged with the local producers and using local food and drink and getting that into our vehicles and distributed to the community stores and the hospitality, rather than relying on the long supply chains that we currently are. It is probably going to be longer-term and not short-term necessary and is not necessarily fixed for Christmas, but we will do our best as a lacking promise. Can I ask Peter Orr or John Swin's comments on the same topic, please? I am happy to answer something on that, convener. I think that, as Peter Orr alluded to in his opening statement, one of the strengths of the convenience store sector in the past few years has been that it has diversified its supply chain to some extent. We have seen a big move towards engaging and developing business relationships more than with local suppliers. The goal local project that Peter Orr mentioned has been specifically set up to move that forward and to increase the space that convenience stores can offer to local suppliers. I think that diversification of supply chains has been a big plus factor for the sector over the pandemic, and I think that it will continue to be. I guess that one of the key take-home messages from today is that we think that diversifying that supply chain and creating relationships with local suppliers is very much the way that we think that the food supply chain in Scotland should develop. One of the issues that we are trying to address is that a lot of manufacturers in Scotland are still not convenience ready. Historically, they have been able to scale themselves up to supply for larger retailers, but the knock-on impact of that has been that the convenience channel has been closed off to them. However, we are keen to open up the convenience channel to a much greater range of manufacturers in Scotland. We are doing some interesting work with Scotland Food and Drink on that. I am sure that there is more work that we can do with David and his colleagues on that. I think that developing those local supply chains, developing those local connections with Scottish manufacturers and ensuring that manufacturers are convenience ready, if you like, is one of the key factors, I think, in moving forward from the current situation. I will now move on to questions on the impact of EU exit, Karen. I find this discussion really interesting. In terms of the local aspect over the last 18 months and seeing how everybody is involved in what parts they play, I would like to ask us about Brexit's impact on the food supply chain. Are there any sectors, in particular, that have been highlighted as having on-going issues at this moment, such as seafood? Yes, there are some sectors that are more affected or at least have been, but I think that anyone who is a small and medium-sized exporter who would previously have exported to the European Union and relies on a groupage, so it relies on their orders being consolidated with others, anyone—it does not matter which sector you are—has found that really difficult, and many, many of our smaller members have said that they have given up on trying to explore issues with groupage and paperwork and logistics are just too difficult. Others have profited, and in particular, if you are able to send a whole lorry load of something, you can manage that paperwork and the risk to yourself. However, if you were sending your products with a range of other companies, there is too much risk there, and so many people have actually exited exporting to the EU until things come down. It is not necessarily a specific sector at the moment, but it is a small and medium-sized exporter. One of the issues was that, when small consignments were sent as part of groupage, the individual cost was a real barrier. Can you see that being addressed and that barrier, the cost barrier, being removed any time soon? Unfortunately, not really. There are ways to do it, I am sure, in terms of paperwork, digitisation and so on, but the real issue is the risk associated. You are putting your product in a lorry with lots of other people's products, and you are relying on them to also get the paperwork right. That is the bit that hauliers and logistics companies and individual businesses find are too risky for them to take things forward at the moment. Can I ask Martin's thoughts on the groupage issue in particular, because we know that that was one of the main issues early on. Is that likely to continue and cause problems for your members? Yes, absolutely. David customs agents across the UK and its supply chain, and it has to be said also in Europe, has meant that, for those who want to continue to move goods in that way, they are effectively having to become their own customs agents. That adds an awful lot of cost and an awful lot of bureaucracy and paperwork to what was previously fairly simple work to carry out. Thank you. We are now going to move to the topic of local food economies. Can I ask Arrianne for her questions, please? Thank you, convener. It has been really challenging to hear what you have been faced with and the people, the businesses that you represent. I am also heartened to hear from Pete and John about the movement for convenience stores. I would say that maybe they become neighbourhood stores to already be taking that initiative around local procurement. I can see that we are going to be doing a bit of work in the Parliament around 20-minute neighbourhoods in this session. I think that you are already leading the way in that, which is great. I would like to ask questions about related to climate and net zero. Probably directed to Martin and Colin. Colin, you were talking about the difficulties of Brexit and Covid, meaning that food was not reaching the islands in the rural areas. Have you been thinking about clearly that climate is impacting food producing countries in the south, in Europe? What are we going to be looking at in terms of the impacts from climate? That is one bit. The other bit is in terms of the haulaging part and the emissions from transportation. The Scottish Wholesale Association sat on the retail steering group and the tourism task force and were integral to the success of both Ambition 2030 and the food tourism strategy. Everything that you have spoken about in terms of climate and food distribution is pertinent to all the strategies that are going to be coming out of those groups. In terms of true locals supply chains, it is important that we get the goods into the vehicles, into the wholesalers vehicles that are servicing the convenience store sector that we are talking about and the hospitality. We do that in a way that is both efficient and, I will say, carbon neutral. The two projects that I alluded to, the local sourcing and delivering growth through Wholesale, was talked about a second ago. As an education training programme in conjunction with SCOS, with some funding from the Scottish Government recovery fund being delivered in conjunction with Scotland Food and Drink, that is the education piece of local producers understanding the wholesale routes to market and the advantages of using the 1,400 trucks that we put on the road, the 70 wholesale distributors and the 115 depots that we can distribute through, and the 6,500 employees that we can help to get their goods onto the shelves, onto the plates, etc. Actors their sales force, the accounts and cetins, etc. Using that, coupled with the decarbonisation project that was just launched in January, the first phase of which is nearly complete. We will share those findings with the committee and that is looking at how we decarbonise the wheels. Particularly the trucks, those 1,400 trucks, we already know the figures because we have just done the analysis. What is the solution for those? It is not going to be diesel, petrol or electric. It is most likely going to be a hydrogen. We are partnered with Arcola and a project to get a hydrogen vehicle onto the roads of Scotland. That is the transport shift project. We are working with hydrogen accelerator, Scottish power and others to look at how we can have carbon neutral local supply chains, sustainable supply chains and creating those 20-minute neighbourhoods that we are trying to establish. It really is ticking all the boxes of Scottish Government's ambition and the race to 2045 and 90. I do not know if that has answered the question fully, but hopefully it has given a more flavour of what we are doing to help to decarbonise and create a greener, more sustainable food and drink supply chain. Martin, maybe you would like to say a little bit about your thoughts on the haulage world. Sure. Since 2013, the haulage industry has produced emissions by 65 to 70 per cent just now and by 2025 that should be around about 80 per cent. The Euro 6 engine is categorised as ultra-low emission, but we realise that that is not good enough and we need to move forward as Colin was saying. We realise that the future is not necessarily diesel, petrol or perhaps electric. I will give you an example. There are tests going on all across the UK and trials going on with various different products and various different methodologies. I was given the example of a type of shunter that is used. It is called a terberg. A diesel terberg costs £92,000. An electric terberg costs £380,000. That is a massive amount when you think that you could be running 15 to 20 of those. That is a massive outlier. What we are finding is that when the conversations are going on, we are 100 per cent behind the net zero plans and the aspirations. The concerns that we have are around barriers to entry and stranded assets. It is not so long ago that the Government was pushing for everybody to have Euro 5 trucks. Now, if you are going to go into low emission zones or gases, you must have Euro 6. As a result of that, the value of Euro 5 has dropped through the floor and the price of Euro 6 has gone up, which means that the barriers to entry are greater. We are 100 per cent behind the aspirations. Our concern is particularly going back to those SMEs who want to engage in the agenda that the barriers to entry remain achievable. It is far better if we can bring the industry along with us than to have the stick constantly beating them with it. We are 100 per cent behind it, but we warn against stranded assets and the value of existing materials and consideration to be given to existing cycles. The average usage of a truck normally for a company would be about 12 years. If you are thinking that in rough figures, a tractor unit would be around £100,000, halfway through that payment cycle, it is rendered useless because of legislation, we have to take the hit on that plus the cost of the new unit. That is a lot for businesses. We are 100 per cent behind it, but we need to be sensible in terms of recognising the fiscal effect that it has on businesses who want to engage. We had a situation not so long ago where a big company through the rest of Scotland was looking at gas trials and so much so that they had built a unit through a new house, which allowed others who were trialling that vans etc to use that as a fill-up point, and then out of nowhere BOC said that they were no longer going to deliver to Scotland because they did not have the economies of scale. That rendered that trial completely useless for not just the company that was storing it but for those who were doing it. So there are difficulties engaging with it, but the will of the industry is 100 per cent behind it. We all want to run greener vehicles, we all want cleaner air for everybody around us. Thank you. I am going to bring Mercedes in for a supplementary, and I will come back to you, Arran, for your further questions. Thanks, convener. It is really exciting to hear all the changes that the industry has planned, but, as Martin pointed out, there are financial barriers and the targets need to be achievable. I am just wondering what the panel would say are the policy changes or the resources that the Scottish Government could do to support the food and drink supply chain to meet those targets and to continue to make the changes that we need to tackle the climate emergency. We can maybe ask Colin to come in on that again initially, and then David Thomson. No, certainly. I agree with everything that Martin said. Obviously, if our members are owning trucks, they face the same issues that Martin has just alluded to. Part of the reason that we got involved in this de-carb project is to help the industry elites within the private sector. There was a lot of investment going into the public sector and looking at new technologies such as hydrogen, nabrodin, dindie, et cetera. The biggest bloeter is the private sector, so the Government needs to look at how it invests in the private sector and make sure that, if we are going to become carbon neutral by 2045, which is in transport logistics as a big ask, I will be honest, we need to be in a comparative playing field so that the pricing that Martin said is not as onerous as it is going to be to convert to greener fleets. There might be subsidies in the vehicles being purchased in similar ways when electric cars came to market. They were subsidised and the Government might need to look at doing that or subsidised fuel if there is a difference in price between diesel and hydrogen or LPG or biofuels or whatever that might be. Logistics is one of the highest costs to food distribution in our vehicles and in the fuel as is our staffing costs. Both of those are on the rise at this point. We are starting to see, I will be honest, wholesale is the squeezed middle that has been spoken about often. We are distributing on behalf of the producers who are sending price rises there in our way, but we cannot rise our cost prices of goods up any more at this end because we are certainly dictated to partly by the multiples and the discounters because we are selling into the convenience stores who cannot raise their prices much more than the supermarket otherwise as we come out competitive. We are squeezed at how much we can raise our price. We are at very much a high volume war turnover business. In the last survey that I alluded to earlier, 90 per cent of our members are saying that cost prices come in from their suppliers, but only 62 per cent of them have managed to increase their cost price out, so our margins are becoming tighter. Government is going to have to invest in supply chain and wholesalers in order to enable us to meet the ambitions of 2045. Just to build on that from the food manufacturing side of things, there are a couple of things. Creation has a 90 by 2040 ambition. Our members have reduced in the UK on-site carbon emissions by 55 per cent of five years early from our 2025 target. There is a good trajectory there, but there are a couple of big questions. The first is about energy production in Scotland. That is actually easier than the rest of the UK. The second one is about heat. We use a lot of ovens to bake biscuits and so on. That is a bigger or more difficult question for the industry to address in the short term, particularly as there is a question over a move to either electricity or hydrogen, if that is feasible. There are a number of these significant investment decisions that businesses will need to make on the road to net zero, and it is in those policy worlds and policy decisions that it is important that there is, as others have said, plenty of time to make that change and support where new technology is several magnitudes more expensive than conventional technology. Can I possibly come in and ask Peter or John on the Scottish Greengrocers Federation? What impact do those environmental challenges have on your business, so that it may reduce packaging or sell by-dates or use by-dates? Do you see issues that you will have to tackle in the future with strengthening environmental policies? I am happy to say something about that. You point about packaging and so on as a good one, but I think that those issues do not impact on us too much. However, I would like to mention to go back to the question about government policy that, if that sounds like a plea for money, that is because it is. A few years ago, we developed a programme with ZeroWay Scotland, which provided funding for retailers, convenience retailers, to carry out eco-friendly and energy-efficient refits of their stores. Typically, that would be looking at smart lighting, energy-efficient chillers, smart metering and so on, and it was very successful. It shifted the dial on the whole way that our members were looking at how eco-friendly their stores were, and it helped to move the sector towards a greater understanding and a greater need for the whole move to net zero. That project was very successful. The programme that Pete mentioned goes local, which is again helping people to make connections with local suppliers based on government funding. The key message is that a small amount of investment in a small business can have a very big impact, not just on the business itself, but on the wider policy issues that we are trying to address—supply chain, food supply, move to net zero. Another key thing is that they were developed in partnership with the industry. Government just did not develop a programme that it hoped would be successful. We worked together with Sea of the West and with the Government to develop those programmes, and they have been very successful. I think that targeted funding with clear outcomes, developed in partnership with industry, can have a very big impact. A small amount of investment in a small business can have a really big impact. I will now move on to questions from Alasdair Allan. It was related to some of the issues about the supply chain that came up in the previous panel. It was really just to ask whether you are noticing some of the same problems around changes to the certification of imports as you have been or analogous problems to the problems that you have experienced around exports post-Brexit. It was to ask about the impact on your own businesses with regard to the changes in certification to imports that are expected between October and January. I will start with that, if that is okay. The answer is yes, and that comes in three different ways. The first is around the paperwork changes and implementation of new rules for imports. Obviously, an element of that, the actual checking of documentation, has been delayed until January. We are still really waiting to see how that works, and it impacts on our members when they are importing raw materials and packaging from Europe in particular. The second bit around that is the bit that James Withers mentioned, which is around—until there is a COID ProCo around the export and import controls, it is very difficult to negotiate with Europe to make things easier and simpler in terms of things moving back and forward across the border. There is a political negotiations element of that. The last bit is just the general issue of importing due to the massive cost increases in international shipping. One of our members has told us that a container used to cost £2,000 to come from China and now costs £20,000. Not just the cost, but the delays and everything there are causing significant issues. We think that there is still more pain to come on imports as the UK begins to put in place the proper long-term regime. Most of our members are not directly importing their reliant on the likes of David's members but it is a concern that it is just another potential problem waiting in the wings to hit the food supply chain at a time when we are already creaking at the sides and we are stretched any more. I do not know what might happen. The only thing that we have noticed on the import side from Europe is longer lead times. Some of the goods that we import are taken from instead of two weeks or four weeks. There is a reduction in frozen goods coming in, particularly the meats and fresh produce. That is potentially partly because of the limited frozen capacity that is available in the UK, so we are not able to bring in as much because we are not able to store it. I cannot really answer much more on that one, I am afraid. Martin? Our industry is the guys that are moving the goods for David's industry and Colin's industry. Any further delays in the process add costs, but we can also link this back to the skills shortage directly. One of the issues that we have as an industry is the image of the industry as a place to come and work. If the public are seeing queues at ports or they are hearing of down time additional costs from sitting and waiting on goods to be loaded, unloading at ports or railheads, it does not do anything for the image of the industry. We want to be attracting people to come into this industry. Any additional cost that is added, any additional delays that are added, all have to be factored into that 1.3 per cent profit that Colin mentioned earlier on. My old question was again related to Europe and again related to the supply chain. Given that the labour shortages that you have described in the last panel have described are occurring at the very time when we are trying to rebuild the economy post Covid, I noticed that the last panel or one of them made a case for what he called Covid recovery visas. Do you think that there is a need for the UK Government to intervene with some kind of emergency measure of that kind to release some of the strain that there is on the labour supply just now? Again, I was a co-signatory of the letter that was mentioned in the last thing where there was a very clear ask for a 12-month Covid recovery visa to try and find a way to unleash businesses and allow them to attract more people from other parts of Europe and potentially the world in order for that to happen for a short period of time as we try and get over this perfect storm. That would be one thing. There are lots of other things that are required. However, as a way to exacerbate the short-term issue, it might be a tool that helps. Anyone else? Colin Hynes? I would agree completely with what was being said. It would be very useful. It is not a silver bullet and it is not going to cure everything. However, I also think that we should be looking at people who have left the industry, whether that be through retirement or just being disenfranchised with the industry. One of the barriers or two of the barriers are, obviously, there is a medical cost attached to a medical if you are going to come back into the industry. Perhaps financial help with that. I also think that we should be reviewing the CPC requirement, which again could be a block for those who want to return. Even if they only want to do a couple of shifts a week, that is one or two deliveries that are covered that ordinarily would not be recovered. Temporary reviews are absolutely shortage occupation lists and those other reviews for CPC and medicals. Anybody else would like to come in on that question? If I may, we were also close signatures to the letter. As Martin said, that is not a silver bullet. It is a long term how we get people into the food and drink sector and the wholesale sector that we represent. In our last market survey, we had asked members whether they thought that a wholesale task force should be set up. There was an overwhelming response for that, and that would be a wholesale task force to work with the Scottish Government on looking at the recovery of the food supply chain and wholesale, but also navigating back to recovery through greener, more sustainable jobs, looking at the skills within the wholesale distribution channel and making it attractive for everyone, especially the younger workforce. As I said earlier, we are needing people within our warehouses, but we are not just pickers and packers or box-movers. We are educators of the food and drink supply chain. 80 per cent of the knowledge of a retailer comes from the wholesaler. The chefs and restaurants use our members' development kitchens for their next culinary desires or concoctions. When we are looking at a sector that is about the digital skills professionals, data analysts, drivers, decarbonisation experts, sales and marketing professionals, debt and finance advisers, those are all skills that we have within our businesses. It is not known yet, and it is how we use DYW Skills Development Scotland to go out and promote that in schools, colleges and universities, so that people know that those skills can be used in a vital economy to keep people fed in the fields more and more. I have a specific question for you for something that you mentioned at the very start of your opening. You talked about the health connections with food and the potential clash between UK regulations and Scottish regulations through the UK Internal Market Act. Can you expand on that for me, please? I also want to talk about the food process and market and co-operation grant scheme. The one that has just been released has a very short time frame. We need to be asking the Scottish Government why there is such a short time frame to get that application from conception through to completion before you can ask for the money for it. You have already talked about the Go Local Fund, Pete and Colin, which is a great initiative, but I will leave it at that just now, because I know that we are running out of time. On the health regulations of the Internal Market Act, there are two different things here. The clash of the health regulations is based on what foods are deemed to be not healthy and, therefore, under the type of regulation and the types of restrictions that are placed on those foods. We had a set of proposals that were brought forward by the previous Scottish Government and they categorised food in certain ways. We had some problems with that, and they categorised where we were and where we were not allowed to display. In particular, we had issues where that disbenefated small and medium-sized prices. The UK proposals for England are much more wide-ranging in terms of foods that are covered and talk about different sets of bans, including, for example, online banning and others. However, only for businesses that have more than 250 staff, however, you manage to do that. Already, you can see that there will be differences in approach. Supermarkets will have different regulations to work with and food manufacturers will need to understand where and how their products can be promoted in order not to run afoul of whatever laws are eventually introduced. You can see that there is quite a large opportunity for confusion there. The Internal Market Act is more about how you produce food and where it can be sold. In particular, it has an impact on whether we have higher production standards in Scotland than other parts of the UK or even in Wales than other parts of the UK. Food across the whole of the UK can still be sold in Scotland, England and Wales. Northern Ireland is a unique case because of the Northern Ireland protocol. Again, there is a likelihood of confusion about how that works. In particular, I can foresee quite an issue in terms of how it is implemented by local environmental health officers who are checking up on things. There is quite a lot that food businesses will need to be probably without even knowing that they will. Lastly, on food grants, I agree that it was disappointing that we had, only until the end of the year, to not just apply for the food grant but to get all your invoices out on the work done by the end of the year. I understand that it is because the Scottish Government, quite understandably, is on annualised budgeting at the moment, so it could not commit beyond that. However, there is some good news in that they are already saying that they will consider projects for the next financial year. How do we get a stable budget that allows the Scottish Government as food division and others to plan for longer-term investments? If we are talking about putting in new lines, if we are talking about that kind of significant investment, which we all want to see in the rest of net zero, we need a longer lead time and a longer build time than the time that has been made available this time around. Can I just clarify one point that you made? Scottish Government introduced the minimum pricing or unit for alcohol. Is that the kind of area where we may run in a difficulty? My understanding is yes. Not with minimum pricing because that was already extant legislation, but anything like that that comes forward now could potentially be called by the internal market act. I would leave it to the lawyers to work out precisely where that would be. I will move on to our final questions from Rachel Hamilton. Thank you, convener. Sorry, David. I am going to ask you a question here again. It was something that you said in your opening remarks regarding obesity and our obesity strategy, particularly the Scottish Government's aim to reduce childhood obesity by half by 2030. That is quite a big challenge. Obviously, it has been delayed and we yet await the programme for government. However, what impact will that have on the food and drink industry with regard to reducing salt, fat, sugar, et cetera? What impact will that have on promotions? That might appeal to Pete to answer as well. The tackling of obesity is hugely important for Scotland, the UK and the food industry. It is something that we can all get behind. That is why we are working with the Scottish Government on our reformulation project. That is supporting small and medium-sized enterprises in Scotland to reduce fat, salt and sugar and increase on a diet-like fibre. That has had an enormous response. We have engaged with over 400 companies in Scotland. We are already on the way to taking millions of calories out of the Scottish shopping basket. It has been a real success for a very small investment over the past couple of years. We also opened a bit of challenge funding last year for companies that were over-subscribed. For example, I have used the funds to adapt traditional products such as Haggis by putting them to make a healthier and lower-fat version. There is real activity, which is really good. The harder part of the conversation is around regulation and its impact on the industry. We have always been very clear that the Government needs to be very careful about the impact on small and medium-sized enterprises. We all want to support a vibrant and diverse food industry in Scotland. Some of those products are not what we fall into a category of healthier products, but you could quite heavily affect some SMEs with some of the measures that we are being supported. Whatever regulation comes in, the food industry will adapt and work towards. We want to help to deliver to Scotland where we are able to reduce childhood obesity, but we need to be very careful about the measures that we implement to make sure that they are not disproportionately affecting in particular the rest of the world. Do you want to add anything to the question about reducing childhood obesity and the impact and challenges that it might have? Sure. We have been running a programme called the SGF Healthy Living programme since 2004 to deliver a healthier lifestyle in deprived areas, and that has been extremely successful. Again, I will echo some of the remarks that David has just made regarding the effect that it has on SMEs. Every single piece of legislation that keeps coming out of government affects our sector, and the moratorium on policies would really benefit a bit of breathing space for our sector. Even if you look at it this year, the amount of policies that we have had to the Natasha's law that we have had to comply with from the first of October would be working with our colleagues at the FSS. There is so much legislation, the DRS system that is going to be coming through. If you listened to colleagues earlier on regarding the haulage problems, how on earth are we supposed to deliver a world-class system that is going to have a huge problem with drivers? There is so much legislation that we have to deal with, that we have to be very careful that we do not drive businesses out of business. Thank you very much. Excuse the point, but that is plenty of food for thought. It has been a very informative session and it will certainly help us to form our business planning through the session this year. Thank you all very much for joining us. We will now move into private session.