Welcome to the 26th meeting of the Economy, Energy and Fair Work Committee for 2018. First of all, I remind everyone to turn their electrical devices to silent or off if they might interfere with proceedings. The first item on the agenda is a decision by the committee to take items 3, 4 and 5 in private. Are we all agreed on that? Yes. Thank you. We now move on to our pre-budget scrutiny. First of all, we have from Highlands and Islands Enterprise Nick Kenton, director of finance and corporate services Charlotte Wright, chief executive and Carl Buxton, director of regional development.  We'll move straight into questions and we'll start off with one from committee member Jamie Halcro Johnston. Thank you very much. Welcome to the panel. I want to know quite a couple of questions, a number of questions. One, some will focus on broadband. To start off with, I'd like to know how the reduction in budget over the recent years has impacted on Highlands and Islands Enterprise's work and also your ability to provide, maintain and safeguard employment. If I could stop just to talk about the budget. Our budget has actually remained fairly stable over the past three or four financial years. We reduced slightly in 2016-17 as a result of the spending review. We went back up again in 2017-18 and we benefited from some in-year capital additions in 2017-18. For 2018-19, the resource budget has gone up slightly. Capital budget has stayed the same in terms of baseline, although it's lower than last year because we had benefit of some increases in year last year. The budget has been relatively stable in cash terms, where that translates to a slight reduction in spending power. On the second part of your question in relation to supporting jobs over the last year, 2017-18, in fact, we dedicated more of our resources directly to support to companies in pursuit of creating sustainable employment. I have a general point. If you were analysing performance and targets, how many jobs have been created by your account managed companies over the past year? How much do you feel that you can attribute that to your work and your interventions? The jobs that we counted against our performance measures for 2017-18 were 981. The majority of those jobs created come through our account managed portfolio. We give support to non-account managed companies also, depending on the nature of the project or in some of our broader programmes such as internationalising and innovation. The way that we count those jobs is that we only measure those that are created through our support, so we have a process to be able to do that. An expansion project by a company may create 100 jobs, but we will examine through an approach that we have of looking at what we call the base case, what would have happened without our intervention and then what has happened with our intervention so that we can attribute the amount of job growth specifically to the intervention that we have made. If it is helpful, we can provide you more detail on how we actually do that. What would your target have been? You did 981 jobs last year. What would the target have been or would you have a target for job growth? Yes, we do. We have a target range. Last year it was between 800 to about, I think it was maybe 1200, but it was about mid-range. Over the last five years, we have met all of our job creation targets. I am sure that other colleagues will pick up more on that. One of the areas that I wanted to ask was around broadband. One of the areas that seemed to have been cut had quite a major cuts to it was around £8 million on the investment in broadband. I was just wondering why that budget has been prioritised in that way. Given that the region remains so dependent on good quality broadband, how that decision was made? Is that with regard to the broadband programme that Highlands and Islands led with support from the Scottish Government and the UK Government? I do not think that the budget was cut for that. I think that the spend has been lower than the forecast spend, but the delivery has been, as we said, in the contract. We have actually delivered all the contractual targets that have been met, but with a lower level of spend. We are continuing to spend beyond the original period of the contract, both through making use of the underspend, things that have been delivered more cheaply. We have been reinvesting in further roll-out, and through clawback via the take-up. The original take-up was targeted at about 30 per cent. We have been reaching over 40 per cent of take-up, at which stage BT reimbursed money into the contract. Although the spend is a bit lower, the actual contract has delivered more with less money, to be honest. That money would still be there then to spend. It just has not been spent now. It is still there. I think that the intention is to roll it into R100, so it will be delivered through the next procurement, because otherwise the current contract would continue on. We are looking to finish build under the current programme in December next year, by which time the R100 programme should have, procurement should have completed and will be able to roll out the future contract. Are you confident that you are meeting the requirements that are given to you to deliver these, deliver the broadband rider? Certainly under our current contract with BT, we have delivered our contractual targets, which was originally 84 per cent of premises across the region. At a local authority level, we had set a minimum of 75 per cent coverage in each local authority area, with the exception at the beginning of the contract of the Western Isles, where we felt that that was going to be extremely challenging to meet, and we set a target of 70 per cent. In reality, we have achieved 78 per cent coverage in the Western Isles, and our highest local authority is Murray at 92 per cent coverage. We have reached all those contractual targets. The R100 programme is currently out to procurement. I do not think that there is anything getting away from the fact that it is the most challenging bits that are left to cover now, so there is still a big job to do. How do you evaluate the work that BT has reached us in terms of the role? How do you check that compared to the money that goes in? We use some independent checkers. There are a number of independent organisations that check what the take-up is, what speeds they can achieve, and we are getting consistently good results on that against the contractual targets. As we move to the R100, which is, as I say, more challenging targets than it is 100 per cent coverage, there is a big job to be done. Can I just quote you very quickly, then, the superfast broadband for Scotland report that came out, which you will be aware of? In the summary, community broadband Scotland did not deliver the anticipated benefits for rural community broadband projects. A review of CVS's role found that lack of specialist skills, poor communications and complex tendering requirements contributed to lengthy delays and failed procurements. Community groups told us that that has affected their confidence, the ability of the Scottish Government and HIE to deliver broadband to rural communities. How would you respond to that? As you might anticipate, we would challenge some of that. CVS had an incredibly difficult job to do. Quite a lot of the evidence that came out in the report or the findings of that support did underscore the difficulties in the smaller broadband delivery market. A lot of the procurements, there was not a lot of interest from broadband providers in delivering the projects. I think that we are all aware of some of the bigger projects, which faced very big challenges in terms of sustainability. We always looked when we were looking at the projects with community that they did have a sustainable future. That was very, very difficult in some cases. Again, it was challenging. We did decide that there might be better ways to deliver it moving forward. As the new programme comes, we are looking at aligned interventions and how we might deliver those. However, it is a huge ask of communities to take those projects on. We are looking at new ways, rather than the existing model of rolling out broadband going forward, particularly to those more remote rural areas, as in the Highlands and Islands. We have to be open to other ways. The R100 programme is looking to go as far as it is humanly possible with fibre. However, in some areas, there may have to be alternative solutions but not necessarily delivered by communities delivered in a different way. I think that it is maybe worth highlighting that we try to do an innovative approach. In doing innovative approaches, sometimes things do not work out as you would want them to. What we found was that it was incredibly complex. You can imagine the reception in a community hall when you start off with the words procurement and state aid. Communities really want to hear from us, or not as it sounds like we are trying to be helpful when, indeed, we are, but as you will know, they are some of the realities that those types of projects need to deal with. What we get from that is a whole set of lessons learned that we can apply working with the Scottish Government to the R100 project and looking at, as Carol said, the aligned interventions. We are acutely conscious that those last hard-to-reach places in the main are still parts of the Highlands and Islands, and we absolutely agree that it is imperative that they get access to proper broadband and mobile coverage. Andy Wightman, you said in response to a question about the jobs that you have created about how you assess the baseline of what would have happened without your intervention. Can you say a little bit more about how you do that? Working with, for example, an account managed company, we would look at a growth plan with them for investment and other types of support. In doing that, we will work through their set of projections and numbers and determine what their trajectory would be without our support, and then what difference our own support will make in terms of scale or timing or both, and particularly where that impacts on job numbers. We can send that detail if you would like to see that. It worked through with some examples, which will probably be helpful so that we have that base case. A project may well still happen without our intervention, but with our intervention it either happens more quickly or at scale. We can also be clear that there is a direct attribution between the support that we make and the jobs that we are claiming through our performance measures. We will not claim the whole set of jobs that might be created through a project but those that we can attribute to our intervention to that project. In some cases, that might be quite specific. A project might have a number of elements, some of which we do not need our support. We will focus on the elements such as productivity or expanding internationalisation or bringing automation or improvements to productivity into a project. If that is helpful, we could perhaps give you a two-worked example so that you can see that. That would be helpful, because we have an interest on an on-going basis in making sure that we are spending public money effectively. In your annual report, you said that you have had six inward investors to the region. One of those is Liberty and Fort William, what are the other five? Liberty is actually from a previous year. I will see if I can remember them off the top of my head. Perhaps some of my colleagues can look for them while I am working. There is OpCapita in Murray, a software development company. Aseptium? Aseptium is in Inverness that does decontamination of equipment for hospital services. Sorry, I just need to look up the list of the things that have gone out of my head. Is it not a test? Those are relatively small companies? Yes, they are relatively small. To take the example of Aseptium in Inverness, which is based on the Inverness campus, it has been targeted through the focus that we have for the development of the campus. We put £25 million into the development of the campus to create infrastructure and conditions for inward investment, particularly in a niche sector of life sciences around medical diagnostics and technology. Aseptium fits that brief exactly. One of the strengths that we have been able to market for the Inverness campus development is the partnership that we have, particularly with the NHS, which is based just across the road. Indeed, the next phase of our development includes an acute care centre that will take place on the campus, which creates not only a facility for patients but also for research and development. The principle around that is bringing on to site companies that can derive benefits from working through the partnerships and key assets that we have to offer there. The liberty in Fort William talks about hundreds of new jobs. Are some of those hundreds included in the 981 for last year? No, they are not for that year. No, they are not because the project and the liberty is at a relatively early stage. If we direct financial assistance, that is at the only stage that will claim any jobs. Liberty, at the moment, I think, is forecasting around about £400 million. Still to be determined. Our work has been very close with the Scottish Government and other agencies, particularly Highland Council and others. What we see at our role at the moment is facilitating everything that needs to happen around the liberty development to make that work. As it happens, I live in Fort William, so I am very close to that. There are challenges in getting those skills, getting those people and providing housing. The real challenge for delivering the liberty project is attracting the skills base to Fort William without having a detrimental impact on other key businesses in the area who are already facing some skills challenges. When you look at inward investors—obviously inward investors cannot be from abroad, they could be from the rest of the UK—what assessment do you make us to the likelihood that, if you were not to support them, they would go somewhere else, either in Scotland or the UK? Yes, so that is an important aspect of what we would look at in attracting inward investment. It is important nationally that we are attracting that inward investment to Scotland, and that is the key consideration for us and our colleagues in Scottish Enterprise. We will be landing that project for Scotland, and often determining what we have can make a more attractive proposition in Scotland is based around what assets we have. They might be about our academic base in universities, skills or natural capital around it. Liberty is an example of having made an investment in what is now the UK's only aluminium smelter to not only sustain that development but to take it into added value manufacturing process, which helps the UK's car manufacturing sector to potentially post-Brexit by securing its supply chain, by developing a part of the supply chain that currently does not exist in the UK. As a case study, that has a number of those key elements. My first few questions are principally to Scottish Enterprise. Scottish Enterprise in 2017-18 spent just over £19 million on, I quote, inclusive growth. That is equivalent to 8 per cent of its total operating expenditure, while only 8 per cent, given that inclusive growth is meant to be front and centre of our country's economic strategy. Should we leave those questions for Scottish Enterprise? Yes. Perhaps we can move on to some questions. I won't ask about regional selective assistance then. I wonder if you could tell me how many Highlands and Islands Enterprise account managed companies are led by women? Yes, I have that information in my pack. I'll maybe waffle while Charlotte finds the figures. We've done some analysis recently about the number of percentage of women that not only run our account managed businesses and social enterprises, but also participate in our programmes. The levels are increasing on a yearly basis and are roundabout, in most respects, at the halfway mark now. In terms of leading and managing businesses and social enterprises, we have much higher figures of women leading at the CEO level, for example, social enterprises, rather than businesses. I'm looking at my colleagues now to see if they've found it. I'm sorry, I have to do some figures. I was within the programme stuff, I think. Apologies. There are so many things that are delayed in getting that. Female ownership of our account managed businesses is 33% on the business side. We also have a split for our social enterprises as well. The amount of account managed businesses that have a female chief executive is only 14%, so recognise that as a low number. Interestingly, it is much higher among social enterprises at 45%. You can see the difference between business and social enterprise, which poses some interesting questions about whether there is something within the flexibility of working within a social enterprise that perhaps is more attractive or works better for women. That is something that we want to look into. I can also give you some numbers on the senior leadership positions within those organisations. That looks at slightly better gender split at 48% of senior leadership positions in business or led by women. Again, that is higher for social enterprises at 64%. That is something that we have been tracking. We have quite a lot of data that sits beneath that. I'm very aware of the success that social enterprise has in women's representation at a senior level. I'm also aware that the Highlands and Islands punches well above its weight in terms of the proportion of social enterprises in that part of the country. I wonder if you could say a bit more specifically about some of the programmes in terms of how you will support the advancement of senior female leadership in companies that are not social enterprises but in key sectors and key growth sectors of the Highlands and Islands economy? There are a number of things that we are doing across the board, including working with other partners such as investing women. We have done a number of events with investing women, both looking at both sides of the equation and getting women as investors and also investing in women-led businesses. We have worked with Women's Enterprise Scotland, and they have delivered for us a training course for our account managers to improve their awareness of some of those gender-specific issues for businesses overall. We are also running a couple of European projects that have a focus on gender balance. A Northern periphery project looking at the Arctic area as partners is looking at challenges experienced by women starting up businesses in rural and sparsely populated areas. That is a strong connection for the Highlands and Islands and working with partners in countries in that Arctic area, such as Finland, Sweden and Ireland, particularly those who have that predominance of rural and sparsely populated areas overall. We also track the take-up by women of our programmes that support businesses overall, and looking at the gender split of take-up of those programmes is quite interesting. We have a number around management and leadership, which are pretty well balanced between male and female take-up. The ones that stand out for me particularly are about mentoring and also use of accelerators. Mentoring finds that only 35 per cent of those taking up mentoring are women. Again, that poses some interesting questions. I was at a think tank that Women's Enterprise Scotland organised last month. In fact, it had two parallel events, one all women and one all men, and we are awaiting the report of that. However, the all women event actually had a real focus on the importance of mentoring. Looking back at those figures, it is interesting that there still seems to be some inbuilt challenge to women taking up mentoring as part of the support overall. In terms of use of growth accelerators, we found the greatest traction for women involved in those accelerator programmes. We ran a virtual accelerator with entrepreneurial sparks, so that it was not the requirement that you often get to be in a certain location for a certain amount of hours, but it was more flexible. That met our requirement of reaching some of our more rural areas, as well as clearly developing some of the flexibility that women entrepreneurs are obviously looking for. Do you have a bit of detail behind some of that data again, if it is helpful to share some of that? It is certainly important to not make any assumptions about the programmes that are likely or not likely to appeal to women. Some of your figures are quite… There is a quite a stark variation between 71 per cent of women on the entrepreneurial spark, virtual pilot and 35 per cent of women. You also have been doing some work on childcare pilots. Is that for preschool children or is it children of all ages? I do not know, to be sure. I am fairly certain that it is for children of all ages. Again, that was really based on some of the work that we have done around occupational segregation and the reasons why women were not taking up opportunities. That did tend to revolve around caring responsibilities, particularly childcare. We have done a couple of things. We have one pilot in the Western Isles, where we are looking at a social enterprise model for childcare, but certainly coming through from our research in terms of occupational segregation, childcare is a significant issue, along with other things such as transport, in our more rural areas, which are a barrier for women going into the labour market. It is a sort of double hit, because the development of the child care facility itself creates quite often a social enterprise opportunity for work and employment, as well as creating the conditions that would enable others to take up employment. Of course, there needs to get more men into childcare as well. My final question for this panel, convener, is following on from the detailed explanation of what Highland and Islands Enterprise is doing to improve gender balance within businesses and the various economies. There is also a youth employment action plan, there is a fair work convention, there is a disability action plan geared towards reducing the disability employment gap. There are many organisations working to improve the underrepresentations of people from the BME community. Can you speak about diversity more broadly? Yes, and conscious of probably a need to do more in some of that area, it is probably fair to say in relation to the diversity of the Highlands and Islands itself that that perhaps creates some of the conditions that we see reflected in our businesses overall. To be fair, there is probably some more work that we need to do in relation to disability. We are also taking forward as an employer ourselves the opportunity to provide employment to care leavers, so we know that that is sometimes a challenging area and feel that, as an employer, we should lead by example. We are looking at developing that as a case study ourselves. Do you find that by trialling some of those employment practices within our own organisation, we can indeed practice what we preach? There is probably some more work to do on some of those areas for us. In particular as well, the youth agenda is quite important in our area. We do quite a lot of work in terms of talent attraction and trying to increase opportunities for young people. We have done some research both through our business panel and a specific piece of research looking at the aspirations and attitudes of young people this year and looking at the tensions between what employers are looking at and what young people are looking at. Some things rank more important like work-life balance in terms of looking for job opportunities. We are looking at the outcomes of both those pieces of research and seeing what we can do both with our young population, which is a very positive story coming through again. The numbers of young people in the region who want to stay and live and work in the region are increasing year on year, but looking at how we work with our businesses to ensure that they are offering the types of opportunities that young people are interested in and want to take up and that they understand what that looks like. One of the key things that was coming through from the young people study is that they are not always necessarily looking for a job for life. They actually want the opportunity to move around and gain more experience until they decide what they want. Working on things like the graduate placement programme in which they are offering people a 12-month to 80-month placement has proved very successful in both retaining young people in the area and not necessarily in the business where they have undertaken their placement, but maybe in another business within the Highlands and Islands region. Jackie Baillie Thank you, convener. Can I ask you about things that are perhaps missing in your report or, indeed, maybe not really given much attention? There is one small mention of the oil and gas industry. At its height, I believe that it led to about 10,000 jobs in the Highlands and Islands area, now at least about 1,500. I am curious to know why there is not a mention of it. I think that it is still important in Shetland, in the Cromarty Firth. I would be curious to know what action you intend to take around about the oil and gas industry. Jackie Baillie I guess that was just a choice about providing flavour and overview of activity. In no way to diminish both the importance past and present to oil and gas within the Highlands and Islands, and we have invested considerably across the board. We have around 150 companies in account management who are in or provide services to the oil and gas sector. It is quite difficult to get a firm number and there are no official statistics of employment on a regional basis in oil and gas, but we have very good connections through employment agencies and estimate the number of offshore workers in key positions from the Highlands and Islands to be somewhere around 6,000, so it is pretty critical in terms of its employment overall. I think that there are some exceptions and we did have one significant company who went into administration last year based in Murray, but overall the sector has proved quite resilient in the Highlands and Islands and I think that is because it has been able to look at diversification during the oil and gas downturn, including into renewables and other sectors of engineering overall. We have supported quite a lot of activity with those 150 companies in our account management base in terms of innovation and internationalisation in particular, as a lot of that oil and gas service work is in high demand overseas, as you will know overall. For 2017-18, we provided grant support to 17 companies totaling £2.6 million. We have also seen some successes through working with the Scottish Government with the decommissioning funds, so those funds have gone into the dry dock at Kishhorn, which is now drained and available for work, and it looks absolutely fantastic. The development in Shetland of Dalesville for deep water decommissioning, and we have had the—what is it called—alpha—forget the name of the platform that is in being decommissioned at the moment, so a real example of that decommissioning taking place in Scotland in purpose-built facilities in Shetland, and something that we want to capitalise on overall. Of course, if you heard the news this morning, a lot of potential further gas exploration west of Shetland, so Shetland remains very well set up for that, including the ports and harbours infrastructure in the Highlands and Islands again, which we have invested in quite heavily in areas such as Scrabster, standing ready to take advantage of those opportunities. So that kind of detail will be reflected in your operating plans going forward, I think? So we are just in the planning for our next strategic plan, so we've had strategic discussions both with our board and we also do an all-staff strategic session, and we'll be taking a draft of our plan to the October High Board meeting, and yes, we'll look at that kind of sectoral information. I guess it's not going to be detailed for every sector for a strategic plan, but we do have a set of sector strategies which set behind that as well. The other thing missing which I confess surprised me was Brexit. Perhaps you know something we don't know, but I'm assuming it's happening, and it's happening in Highlands and Islands as well. Was that, again, just a matter of detail, or is this not the biggest single challenge facing our economy in the next year? Yes, absolutely, of course. I think that we did make some reference to those sorts of challenges without specifically using the Brexit word, but absolutely it is. If you're asking me what I see as the biggest challenge for the Highlands and Islands without a shadow of a doubt is the people equation. We already have significant challenges across all sectors in all parts of the Highlands and Islands facing challenges, not only of skills but actually of people. Perhaps there, the Highlands and Islands is in a slightly different position to the rest of Scotland in that the challenge and talking to companies, many would like the opportunity of getting people in and training them and not seeing the skills acquisition as a difficulty, but actually the recruitment and retention challenges themselves being significant. We undertake a business panel survey on an on-going basis. We have a panel of 1,000 businesses for the Highlands and Islands, so that's a very significant proportion of the businesses and it's also representative of the business space in the Highlands and Islands. We test that regularly in terms of challenges and opportunities around what might be happening. We see that around half are concerned about skills challenges that are even higher in sectors such as tourism and food and drink, which are very heavily reliant on migrant workers. Many are looking at opportunities in terms of productivity investments to improve their own resilience going forward. The business panel itself gives us some very real and important live feedback from businesses about how they see the challenge day to day. A lot of that focuses on getting the availability of talent and people to be able to respond to what is quite a considerable opportunity at the moment, particularly in those sectors that I mentioned. Tourism has enjoyed a couple of bumper years. The Highlands and Islands has been exceptionally busy and we want to build on that opportunity. Food and drink businesses across the Highlands and Islands with stars in the sector such as salmon and whisky coming from the Highlands and Islands are also quite dependent on migrant workers. We have worked with the aquaculture sector, which again have evidenced some of their concerns about being able to attract skills and talent into their sector. Planning for the future around Brexit is more difficult for us and we are doing a set of scenario planning around that. At the moment, our focus is making sure that our businesses are resilient and that we focus on opportunities. A lot of that is about what exporting might look like for the future, including exporting into growth economies out with the EU. One final, very small question, convener. Obviously, Highlands operating includes community development and support for fragile communities. We have seen you do that in the past. What challenges do you face in doing that in the future? How can you instill some of that knowledge to the new south of Scotland enterprise agency? Strengthening communities' activity remains a core part of what Highlands and Islands does. We are working to four priorities and strengthening communities as one of those key priority areas. Our board is absolutely supportive that we continue to give that focus to our remote and rural communities. We account manage a set of communities in the way that we would account manage businesses. Clearly, land reform and community ownership of land and assets has been key to what we have done in the Highlands and Islands. There will be no change to our strategic view of working with communities and through our approach to inclusive growth to ensuring that prosperity reaches all parts of our Highlands and Islands. That, I recognise, is not without its challenges. We see areas such as Argyll and the Western Isles who are losing population and, in some areas, that is giving us a great cause for concern. We have great numbers, as Carol quoted, in terms of what young people are saying and their commitment to their area. There are parts of the Western Isles and the US that look particularly fragile, given some of the population loss and equally in parts of Argyll. We are working with local authorities in those areas to see how we can focus our joint efforts even more to ensure that we create the resilience and sustainability of those communities. Just to follow up on that point from Jackie Baillie, is there a definition of fragile, or is it everywhere except in Venice, or how does that work? It is a basket of things that we look at in our definition of fragile, which includes spositive population, distance from a town or service centre, reliance on transport such as ferries and others. I probably missed some. That is an objective measure. Going back to performance measurement targets that have been mentioned already, as I understand it, you comfortably met all of your targets for last year. That strikes me as a little bit unusual. If we look at the health board, they will meet some and they will not meet others. If we look at the railways, they will meet some and they will not meet others. That is quite normal. I would say that they have got challenging targets and they are unlikely to meet them all. Are your targets too easy? We did not feel so. In some cases, it was a challenge to reach them. However, I can assure you that we have had exactly the same conversation with the high board, who are asking exactly the same question. We will be ensuring that we take on-board any comments about the challenging nature of our targets. In the year to date, we are seeing some areas lagging behind in our set of targets. One of them is the amount of turnover of supported companies that has driven through internationalising. We are finding that looking quite a struggle at the moment. At points in the year, some of those targets can look quite difficult and some of those do at the moment. Is the high board approved this year's targets? Are they the ultimate approval? Yes, that is right. So, going forward, there is going to be the strategic board. Will they have input into that specific level? We are working with the strategic board to ensure that the performance measures and targets that we use can contribute and that the data that we produce can be aggregated up to the specific measures that the strategic board requires to track. However, in terms of the governance arrangements, they remain unchanged in relation to how high performance is reported to its board and to our sponsoring department. So, as the strategic board would just add together what you, SC and South of Scotland are doing, they would not come back to you and say that you need more jobs. For example, as I understand it, the number of jobs was 981, we said, and the range appeared to be 700 to 900. You are not expecting that the strategic board will come back and say, no, you have got to do 1,000, you have got to do 1,200, something like that. The focus of the strategic board will be slightly different in terms of what it is looking to track in terms of the performance measures that ultimately focus on improvements in productivity, which is the overriding objective of the strategic board. Working with the strategic board's analytic unit to make sure that what we can produce from the data of the interventions that we make can be extracted from our systems to contribute towards the coherence of the targets for the strategic board. I am not sure that I am 100 per cent clear used the word track there, which suggests quite a passive role for the strategic board. Do you see them being more passive or more active? I am sure that they will be very active. I suppose that what I am trying to articulate is that they would be looking at a different set of specific measures so that the strategic board is not the aggregate of the measures that we are reporting on individually, but a set of measures that the strategic board determines as the important measures for looking at both activities and outcomes and impacts, which will make the difference to the overall prize of improving Scotland's performance in terms of productivity. Does that not come across clearly? I have just got one other area that I want to touch on following on from Angela Constance's questioning. We got the summary of the Gender Pay Gap report, which was helpful. One or two words jumped out at me, which were that High is fully supportive of promoting the Scottish Business Pledge as a voluntary measure, and that later on it says that we are supportive of the drive to encourage more businesses to report on the Gender Pay Gap. Those are quite gentle words, it seems to me. Would it not be possible for you to say to Company X that if you want help from us, you have to sort the Gender Pay Gap, you have to follow up with the business pledge? The approach that we have taken has been very much about promoting the benefits of equal pay and gender balance and elements of the fair work agenda through the pledge and others. We track that information through a set of ladders that we have. We have a business values ladder that we work with our account manager businesses on so that we can determine where they are at the start of their account managed journey and be able to demonstrate that that is a progressive journey for them. However, it is true to say at the moment that our approach is about working and supporting the benefits of those approaches rather than looking at any negative or conditionality approach. One of my colleagues will follow up on that, so thank you very much. Colin Beattie A recent David Hume Institute report highlighted the fact that, in 2016-17, Scotland spent over a billion pounds on enterprise and economic development. That is a much higher amount per head than most other parts of the UK. How can we be sure that that spend has improved our economy more than, for example, that it was invested into education or other contributory areas? How would you respond to that? That is a very big question. Sorry, I am not familiar with the report that you referenced, but in terms of the general point, that is a key question that we look at. It is also part of the agenda for the strategic borders. Are we deriving the right value and impact from our investment through the enterprise and skills agency? A key point that I would like to highlight is what exactly we are measuring. We have spoken this morning about the role that Highlands and Islands Enterprise has in working with social enterprises and communities. For our approach to holistic economic development, being able to demonstrate those social impacts is equally important for, for example, a straightforward return on investment-type of leverage calculation. I would be cautious about trying to compare apples and pears without knowing the reference document that you are talking about. However, our overall strategy and Scotland's economic strategy gives equal place to inclusive growth by being able to measure that through the work from the Highlands and Islands point of view that we do in relation to supporting communities and social enterprises as working with businesses and investing in infrastructure, all part of the components that develop a prosperous economy. Certainly, work that we have done in the past has demonstrated that the long-term nature of some of those investments is really important, too, so being able to track investment over a long period of time as an agency that has been around for a long time, that is something that we are able to look back and demonstrate. We started off the conversation this morning about broadband investment. I would suggest that that is one of the most critical investments that can be made at this point in time for the economic development of Scotland as a whole and for the Highlands and Islands to keep pace with that, too. The report that I referenced was purely from the purpose of highlighting the billion pounds being a very large sum of money that is being invested back into the economy. I understand the responses that you have made, but I still do not see how you could weigh the two. The present system that you are following, or what if it went to an alternative place, such as education, which is so important. A good chunk of that money going in there would be transformational. How do you measure whether it might be better to put the money elsewhere as to the present model? Is the present model that you have got changing at all? Is it flexible enough? As an agency, we have a high degree of flexibility to work within the remit and parameters that we have. To be fair, the decision-making about whether to invest in enterprise or education is not one that we make. We take the funds that are given to us through Scottish Government and invest them in the areas where our remit operates, which are around business investment, community investment and infrastructure investment overall. We are making relative choices between how we use that in those parameters. The questions that you raise are behind the formation of the strategic board, which is looking at the composite work of both the enterprise and skills agency and asking some of those bigger questions of the way that the agencies work together. You have highlighted several times the question of the 981 jobs that have been created. That is a very raw measurement. One thing that I would be very interested in is the quality of those jobs. Are they high-end jobs? Do you know the difference between shelf stackers and people that are involved in R&D or something similar? Obviously, I would have hoped that you would have some sort of a thrust to bringing in the higher-end jobs into the area. Yes, I absolutely agree. That is an important point. We look at that particularly in relation to the wage rates. We are tracking the wage rates and actually setting a measure of ensuring that the average wage of the jobs that are supported is higher than the regional average wages. That gives us a proxy in terms of quality through pay. The jobs that we support are a mix, so that there are a number in R&D, for example. They will tend to be focused in areas such as in Venice. Given our requirement and strategic imperative to make sure that we support all parts of our patch, there are areas where simply some of those types of jobs do not exist. There may be support into sectors that may well be lower paying but are absolutely critical to the sustainable communities that I spoke about earlier. We are conscious that that is a mix. We track across the areas within the highlands and islands that average wage created through the jobs that we support and what the average wage is in each of those sub-regional areas, so that we can track that. It perhaps would not surprise you that areas such as the city of Inverness or Hire, places such as Shetland, can attract quite a high wage level. That is around the oil and gas activity areas, such as the western isles and parts of the western highlands, such as north-west Sutherland. Those wage rates tend to be lower. Do you have any information on the breakdown of those 981 jobs? How many do you fault the category of higher and average income? I do not have that to hand, but I am certainly happy to supply that. That would be helpful, because it would be interesting to see how that breaks down. I will refer again to the David Hume report, although I realise that you have not had access to that. The report concluded that how well firms are managed is strongly associated with the productivity. Scotland has relatively low productivity levels compared to other countries, so, quite simply, do we conclude that Scottish companies are badly managed? We provide a lot of support on management and leadership to account-managed businesses, because we recognise the importance of those elements to successful businesses. We do a range of leadership development, including emerging leaders and senior leaders within organisations, so that there is a focus on supporting businesses with that management journey overall. It is critical that we provide that kind of support. We have also done quite a lot of work in terms of entrepreneurial activity, support businesses through attendance at MIT in Boston, for example, as a flagship of our entrepreneurial support. Do you track growth and productivity at all, or the impact of your support on those companies in terms of driving better productivity? We certainly do with the businesses that, in particular, we have helped through our high-end leadership programmes. We look at them and how their businesses are performing. In terms of some of the case studies that we have, we have some very good results from businesses across the patch that really feel that they have benefited from engaging in those programmes, and you can see that through the performance of their business and the growth of their business. I do not have stats to hand, but we have some very good case studies that we could share with you in terms of the leadership programmes. As Charlotte said, some of the developments that we have made in our leadership programmes over the last few years are not looking at just the current leaders, but at the emerging leaders and the future leaders as well, because those are the people who are going to drive the growth of those businesses in the future. Some of the challenges through the work that we have been doing with our partners in the enterprise and skills system has been around how you get those future leaders coming through the system, how you tackle some of the challenges, for example, in family-owned businesses and succession planning and energising the younger generation, so that it is getting them at the various stages in that journey. Given the apparently correct statement that it has made that if firms are well managed, then productivity improves, it gets better. Do you see signs of that? Scottish productivity is low, so, again, is that a straight link to bad management, poor management? Do you see any of that? Maybe that is a fairly binary view. We see supporting management and leadership within an organisation's capability as well as looking at its business structures, its approach to investment and work practices as all part of a tailored account management approach. I could say with some confidence that, where all of those are functioning really well, yes, you have a good business that is very productive. Seeing that investment in the people's side of the business and in the management, development and capability of the business pay dividends in terms of the bottom line. Again, if that is helpful to demonstrate through case studies, we can absolutely do that. Apart from Brexit, the increased use of artificial intelligence and automation or the fourth industrial revolution is the next biggest challenge facing our economy. A report in August from SCDI and the Royal Society of Edinburgh and others automatic for the people highlighted that over 800,000 jobs or around 30 per cent of the total are at a high risk of automation. What steps is your agency taking to prepare businesses and employees for the challenges of automation? I think that our approach is about trying to support that investment in automation and productivity. We are working with the Scottish Manufacturing Advisory Service and the development of the manufacturing sector of excellence as great facilities to support that development. As I mentioned earlier, we have a challenge in skills and workforce and labour. Improving investment in automation is one of the key solutions to that challenge, particularly in a big sector in the highlands and islands such as food and drink. We say that there is definitely a scope for greater investment in automation. There are one or two really good examples where that is working. There are still a number of companies that have a journey to go on there. We, by tracking the investments that are made in our account managed companies, have noticed that some of that is needing a bit more influence and investment to make some of those investments happen. I think that that probably goes back to the confidence question that we spoke about earlier, which we tracked through our business panel survey. You mentioned about the fact that the skills challenge. Is there a need to tie up business support with a condition that employers increase their expenditure in what learning, so about a conditionality and getting that business support if we have the skills shortages that you suggest? As I referenced earlier, our approach has been about incentivising and positive benefits rather than conditionality. We are closely working with our partners in skills development, Scotland in terms of some of that use of modern apprenticeships, for example, and we have supported in-work training through supporting companies directly as well. To ensure that Scotland is a frontrunner in this fourth industrial revolution, what is your agency doing to bring together the private sector, public sector and government agencies, so that they work collaboratively to take advantage of the challenges that are facing us? There is a leadership group that has been set up by the Scottish Government, chaired by Cabinet Secretary to do exactly what you are saying there, to bring together the agencies and skills agencies to have that focus on delivering the potential through the manufacturing centre of excellence and supporting that approach overall. I guess that it is early days for that yet, but there is a very clear focus on being able to take advantage of those substantial opportunities that are open to Scotland. I do feel that there is a degree of under-investment in companies in the Highlands and Islands, so we see it as our role to support them, to make that investment, to use our funds to leverage their investment for the future. The great incentive is the fact that, if cheap labour supply is not available, it opens the door for that conversation, perhaps more than it might have done in the past. It is an absolute imperative to do that. My last point that I was going to raise was that the report that I referenced earlier on states in it that Scotland lacks strategic leadership for the fourth industrial revolution. Is that a fair criticism? I think that that probably needs to come from business. Where you have those that lead the way, there is nothing better as a leader than seeing a successful business and being able to use that as a leadership model. I think that, as public sector agencies, we can provide the support and development, but a lot of that leadership comes from the business community itself. It is our job to be able to support that and take those great examples and use those to demonstrate both the benefits and approach to other companies. Thank you very much. That concludes the first session, and we will go to private session for a few minutes to allow change over witnesses. Thank you very much for coming in today. Welcome back. We now have a panel from the Scottish Enterprise. Iain Scott, chief financial officer. Welcome to you. Steve Dunlop, chief executive, and Linda Hannah, managing director for strategy and sectors.  We will start our questions with questions from Andy Whiteman. First, on the question of jobs, you have created in 2017-18 8,500 jobs through the attraction of inward investment. Is that the total job creation or are there other areas in which you have created jobs? In terms of the inward investment job numbers, that is the planned number that we have captured in all the conversations that we have had with companies, but we estimate that over the support that we provide, based on our evaluation and on our research evidence, that over the next three years that number could be much greater in terms of the wider indirect impact on the economy. We are happy to provide those figures to you if that would be helpful. Do you, we heard earlier from Houndsdowns Enterprise about how they analyse the additionality that their support provides to jobs, presumably you undertake a similar exercise or is it slightly different? Absolutely, we do a similar exercise, so we do that at a couple of levels. When we work with an individual company, we would be talking to them about their growth plans, we would baseline with them what their current position is in terms of their employment, we would talk to them about the plans that we are working with them on and the impact that that would have, and then we would work with them over a period of time, so we would do that at the individual level. In a particular project that we might support, so something like RSA, we would be looking at job numbers as part of that and also the quality of those jobs, so we would look at that. We would also look at through our evaluation and evidence work in terms of things like, for example, last year we evaluated our inward investment activity and our export activity, which I think we shared with the committee, so we then do an evaluation to see what actually happened. Part of that includes looking at making sure that that is a direct result of what we do and not just something that would happen anyway. Okay, thanks very much. In your business plan, you commit to tracking progress in a number of areas, including outcomes achieved in areas of disadvantage, number of social enterprises, employment companies and co-operatives supported, investing in youth, playing an active role in the community. Where do those come from? Why were you not looking at some of those before or were you, but you are just doing it a little bit more explicitly? Could you say a little bit more about the significance that you attached to those? Yeah, we have certainly increased our focus in those areas over the last few years, since our focus has been pushed towards inclusive growth a number of years ago. We have been trying to build up the type of evidence that we would want to review in that area, and we are certainly tracking measures on those for the current year, and we will be able to report them towards the tail end of the year. So our sense would be that we have been doing some of this for some time, but I think that we would all agree and all the evidence around productivity suggests that we need to do much more in that area in terms of how we generate inclusive growth and how that growth is spread. One of the things that we have learned over the years is that, by introducing tracking measures, we can learn from that just in terms of what works, what works in certain areas, in certain circumstances, and then look at how we can then roll that out, put some specific targets behind them, and then make sure that we focus on that. So for us this year, we have got a group, as you have described, that kind of tracking measures that we have set out in our business plan to help us to make sure that we can really capture that data and then use it much more actively, not just in terms of the individual elements, but how they sit together in our conversations with companies. So we have already been doing that this year. We do that across the characteristics of the pledge for all our account managed portfolio. We are looking at that, as you have said, around specific things like youth in about particular areas. What we are certainly looking to do in this year's work is share that obviously with the Scottish Government and board partners, and make sure that we use that as we develop our plan for next year for Scottish Enterprise. So it is fair to say that some of this is brand new for you? Some of it is, I wouldn't say that it is all brand new, but there is a greater focus on it, and there is a greater understanding just in terms of how the things work together. Okay, thanks very much. Your grant and aid has fallen by 27 per cent in real terms since 2008-09, but you have also had increased income from other sources. Can you say a little bit about what that meant for your ability to deliver your statutory obligations? Can you remind me what was the date that you started from? 2008-09, so a decade ago. Things have changed quite significantly over that decade, clearly. The early part of that, we saw the decline in our funding, but in the last few years we have seen that level out, and we are pleased with the increase that we got in the funding allocation last year. I think that from the Government it was up from about £218 million up to £289 million, and we have augmented that with the income, as you say. Over the period, we have had to prioritise where we invest those resources, and we will continue to do that. Should those numbers continue to increase, we have a strong pipeline of other activity that we can use those resources for. A significant part of the new resource has been financial transactions. Can you say a little bit about what your views are and how that should be invested, lent and spent? For a number of years, we have had the Scottish Investment Bank as part of our operations. In previous years, we funded that through capital funding, but the nature of the relativity lends itself very much to financial transactions funding, given that that is restricted to loans or equity investments. Over the past three years, that has increased from about £14 million to £45 million and then last year up to £88 million. Our activity in that area is more about the £55 million to £60 million for the Scottish Investment Bank activity, so we are now looking at using those financial transactions for other areas within the organisation, but we will certainly be able to utilise the majority of that through our direct investment function within the organisation. I think that it does lend huge opportunity for us to partner in a different way than we have been in the past. As we look forward to long-standing strategic relationships with universities, with local authorities and so on and so forth, I think that financial transaction money will be something that will become much more useful in the future. We are in the process of spending that, but understanding how we get absolute best value and strategic output from that is going forward. I have a question about Russia. You noted in your annual report that you closed the office in Moscow. It was apparent earlier this year that plans to develop £5 million trade links with Russia have been put on ice because of political developments. Can you say something about the impact that that has had on long-standing trade, such as in things like Harris Tweed, where there was a lot of work undertaken? I do not know the specifics on the impact on trade, but I know that we are still servicing that region. We are just doing it out of our Nordic's office now as opposed to an office in Moscow. I think that we had two permanent staff there, and we are now servicing that from a different area, so we are still encouraging organisations to export into that region. You are doing just as much as you were before, just administratively differently? We are certainly doing administratively differently. We are supporting organisations the same way that we have done in the past. I do not have any statistics as to how much is going on there, but we can get those figures for you. I am sure that we have them in the SDI team that we have got. I am happy to do that. We will continuously review which markets we are in and which countries we are in in order to talk about value for money. We will want to measure performance in each of those areas and demonstrate that those are working for us. If there are alternative methods that we can yield just as much or better, then we ought to consider those. That is something that we can keep you very close to as we move forward. Thank you, convener. You have gathered that I am interested in how we actively demonstrate inclusive growth and the role of RSA in that. If I could start just by asking that, given in 2017-18, you invested just over £90 million in inclusive growth, and that represents 8 per cent of your operating expenditure. I wonder why only 8 per cent? If I can pick up on that, you will see from the move to this year's business plan that we have recognised that the four headings that we were previously using in that year were not really adequate enough to show what we do for inclusive growth. We split our budget allocations that year. We split the analysis of our expenditure over internationalisation, innovation, investment and inclusive growth. Of course, you will find well that internationalisation and innovation investment, the work that we do in those areas, contributes to inclusive growth as well. We have recognised that in the way that we set out our business plan for 2018-19 to show that all of that is contributing. It is a function of the way that we split our business plan headings, but it is not a fair reflection to say that we have only spent £18 million in that area. Is RSA the biggest component or the main component of your inclusive growth investment? As far as the expenditure is concerned—I will go on to some other areas on this—as far as the expenditure is concerned, because of the levels in there, it is about £10 million specifically for the job-related RSA. We do other stuff related to capital investment. It is very much an expenditure in terms of the biggest element in that, but the work that we are doing, working with companies on workforce innovation, is certainly probably more activity that goes on in that area now, albeit not at the same level of expenditure in there, but others may have a view on that. I think that we certainly have seen a shift in Scottish Enterprise in this year's business plan to reflect that it is all about inclusive growth. We will make sure that, in all the conversations that we are having with companies at a sectoral level, with our partners, that inclusive growth is absolutely embedded in that. RSA, because there are often large grants or Seaman's large grants, can look likely to be the biggest component, but I think that we are now in a place where absolutely everything that we do, we are considering that. When we look at approvals, we are asking about how will this contribute to inclusive growth. Part of that is about the people who would be involved in those companies, whether it is a company project or the supply chain, or community benefit clauses, or what they are doing in terms of CO2, etc. We are now building that into everything that we do. RSA certainly in terms of the larger numbers would be the biggest headline number, but we are now baking that into absolutely everything that we do. Is there the danger that there is an assumption that RSA investment automatically equates to inclusive growth when, as you have indicated, where the investment is, who benefits, and what impact it will have on the supply chain, etc.? I think that you are right. I think that there is no one tool that is going to be about inclusive growth. What we have tried to do is make sure that that is absolutely in every conversation that we have. Given the changes in the RSA scheme and the focus that we have about driving innovation in the economy and the R&D grants, for example, we have the same conversation when we are talking to a company about investing in research and development, about how that is going to drive that company forward, what types of activities they will be undertaking, what types of jobs, what does that mean in the supply chain, how can we work with them on that, do we need to work with groups of companies to take advantage. All the work that we do now is about making sure that we drive that forward. We need to do more to raise awareness and use case studies and stories about the investments that we make, and also bring highlights to some of the work that is happening at a sectoral level. We talked about previously at the committee about the sector productivity plans, where the industry was looking at how they could push that forward. A lot of that is about inclusive growth and about the types of things that they are doing to respond to the change in jobs and the change in markets and the change of processes and technologies that they have. There is a much broader group of things and I agree with you that we need to make sure that that does not become just about one scheme. Can you say a little bit more about how inclusive growth is explicitly connected with your performance targets? What I am driving at is that it is very easy to use inclusive growth as a sound buy and say that it is integral to everything. I know that you have inclusive growth performance targets, developing leadership through SCE support, increasing capacity to create international competitive early stage ventures but can you talk about the threads that actively demonstrate that link between inclusive growth and performance targets? We have a range of performance targets, as you know, in our business plan this year. We have simplified them down to six to make them clearer and more specific in terms of what we do. If I can pick an example, like I mentioned to R&D, we are looking at supporting a company on R&D. We will give them an R&D grant or the vastest for that. We will explicitly have a conversation with the company about what they are going to be doing. We will have talked to them about the pledge. We will have talked to them about the elements within the pledge in terms of living wage, in terms of not using exploitative zero hours contracts, in terms of how they supply the suppliers. We will have spoken to them about all of that. If it is a project that is looking to be helping companies to adopt, for example, industry 4.0, we will again be talking to them about the skills element. Are they talking to local schools? Are they talking to local colleges? There is an element of this that is very direct in terms of our own advice and financial support. Part of it is also about how we connect them much more into the community and about the wider aspects of that that will start to generate increase of growth. For each of our performance measures, those types of conversations are on-going with companies or on-going with our partners, particularly in terms of the sectoral work that we do. I am happy to share that with you and maybe give you some examples of what that looks like. Examples would be helpful, thanks. Given that promoting inclusive growth means addressing economic inequalities, particularly within a regional level and between regional levels, Scotland is a small country, but the various local economies all have very different challenges and needs. Can Scottish Enterprise demonstrate where foreign direct investment, for example, is being attracted to? I will accept some of the points that are made. You will briefly note that some of that is about expansion as opposed to brand new investments. Also, on where endeavours are targeted, the specific local areas that have the highest employment gaps? We can clearly evidence where the FDI, where those inward investments are going, so we can share all of that detail. To your point, to what extent can we begin to target inward investment into areas in which we feel that we benefit from those investments most? We are moving into much deeper partnerships with local authorities where regional economic partnerships and, out of that, I would anticipate in the near future that we will get inward investment prospectuses for all those regions that add up to something that Scotland can sell internationally and globally, under the Scotland is now banner. What you see coming forward—we already have them in many areas—is clear and investable propositions that will emerge from each regional partnerships. That will clearly put on offer to global investors on what is available here in Scotland at a national level and a regional level. That will aid greatly. My final question is that the panel will have heard me ask Highlands and Islands Enterprise earlier about how they are not just contributing to closing the gender pay gap and the under representation of women in particular sectors, but more broadly in terms of the fair work agenda, specifically the disability action plan in terms of the disability employment gap. I would also be interested to know what your gender pay gap is, what Scottish Enterprise's gender pay gap is, given that Highlands and Islands Enterprise supplied that information to committee. The latest reported figure that we have for Scottish Enterprise is 14.7 per cent. That was in 2017. That has come down from 17.6 in 2015 and down from 18.8 in 2013. We are making progress in that area, and there is some more work to be done on that. In terms of—as a public sector agent—making a contribution to, for example, reducing the disability employment gap? In terms of diversity, we do not do enough of it, if I am honest, and we need to do more of it. We have been looking at how we do that and how we make sure that that is much more pervasive in what we do. You will know that we do a lot around youth. You might know that we have been looking particularly at women. We have been tracking the number of female-led businesses that we work with. We have been introducing a couple of new programmes in terms of engaging directly with women. We are absolutely listening to that feedback that it is not just about the type of business support, but about how that is designed in terms of how that engages with women. We have looked at other international examples of that, so we are doing more on that. In terms of your point about disabled and other areas, we are in disadvantaged areas and also disabled. We are not doing enough, and we know that we need to do more. We have had recent examples around working with some large and small inward investors about how we can support them to do that, and how we can connect them to the people who have that expertise in the community, who can help to bring forward and identify people with the skills that that company is looking for, and how they might need to support them. That is something that we have got some case studies on, but we know that we need to do more. As an example, we will share that with you in some detail, which is the inward investment that we had with Barclays, which is explicitly going to target 340 new jobs towards disadvantaged disabled recruitment in that specific area. We would like to use that as a case study and to amplify the benefits that come from that. That is a need that Linda says that it will be focused on on going forward. Just before we move to questions from Jackie Baillie, on that issue of disability, are you able to give concrete figures to indicate what success you have had in terms of that? Thus far, I appreciate that you say that you need to do better, but can you provide not just case studies but concrete figures that point to what you have succeeded in that area in accomplishing? We do not have them in front of us, but we will make sure that we do that when we provide the case studies. Right. Thank you very much, and now Jackie Baillie. Let me just explore with you this notion that somehow you have got a lot more resources, because having studied the tables going back to 2008, even up to the most recent years, your core grant has in fact either gone down or stayed relatively the same, so it has been more or less flat cash. The difference has been in financial transaction money, which accounts for maybe about a third of your budget. Would that be a correct interpretation of the tables that I have in front of me? I am sure that, as Jackie, I do not have sight of those tables. I just did not want—I think that earlier you asserted that the budget had increased quite significantly in the last few years. I do not think that that is our experience of your core budget, but of course the financial transaction money, which is a recent development, has made up the difference. I am taking financial transactions as being part of our core budget. I see that coming through. It is not unrestricted. It is for a particular purpose, so you need to use it for that purpose, and therefore not having the flexibility is not good in terms of your core budget diminishing. That is the only point that I am trying to make. The other part of our budget is the same on our resource budget or our capital budget. That is for some types of activities as well. Can I move on now to the financial transaction money, because there have been underspends this year of £13 million. I understand that there is likely to be a greater proportion of your grant that is going to be in financial transaction money next year. How did the underspends arise, and are you confident that you will be able to spend all next year, given that it is increasing? I think that you will see from the accounts where you are picking up that £13 million, the £10 million of that was specifically for one programme that was the Scottish European Growth Fund. I have not got the words right on that one, but it is quite a long acronym that we have for that. That programme is a very innovative one that we put together to work with the European Investment Fund for them to match the £50 million that the Scottish Government was going to put in over a number of years, and that would be matched again by the investors that the European Investment Fund could bring to that, bringing it up to at least £200 million of investment. We have seen that not progressing to the timescales that were originally envisaged. We were looking at £10 million in year 1, then £20 million in 2020 million. There is pipeline there. The number of deals has not come through on that that we expected. We are working hard to continue to deliver that. The Government is committed to the £50 million over more than the three years that were originally envisaged to that. We hope to utilise those funds in due course. That corrects me if I am wrong. That was not announced just in the last programme for Government. That was the one before. Yes, not the one in September 2018. Can you tell me of that sum, how much has been allocated and to how many companies? I think that one or possibly two deals have been done. I think that one deal has been done on that since the beginning of this financial year, because clearly there was none done last financial year. That is why the £10 million was not utilised last year. The overall value of that, I am not sure, will not be in the round about £1 million, but I do not know the exact precise figure for that. Okay. A very tiny amount in terms of what would have been envisaged. Would you envisage going forward? What is the target that you expect for this year and for next? We have set ourselves a figure of £20 million for this year. There is a pipeline there. I can admit that that is under a bit of pressure at the moment. We are talking to the Government about whether those funds can be used for a further other activity this year at the moment. We have started to bottom out what happened with that, so we may not do the £20 million that was in there. You can understand our concern. One deal at £1 million out of a substantial pot that was promised much earlier does not suggest to me that it has been particularly successful. I will not comment on the success, but you will appreciate that that particular fund is for low-volume, high-value type investments. The plan was to average about £2 million a time for each investment, so we are looking at 10 investments that would get up to that £20 million level. I would acknowledge that it is a real challenge as a stretch for the organisation, but we have been reporting into our board this complete visibility in the organisation. I am taking this very seriously and marshalling all the resources to try to execute against what Ian says. There is a positive pipeline there, but that is quite a shift for us. I see cranking up the machine into those wider, deeper strategic partnerships as a way to deliver on that, so I recognise the challenge. We see it, but I would like to give you some confidence that we are trying to address that. Is there an expectation that you will sell land and assets during the course of any given financial year? The Government at least thinks that that contributes to how you operate. Can you tell me if you have a figure for 18, 19 and 19.20, particularly if you anticipate a receipt from the iconic leisure development that is planned and how much that receipt is? On the latter one, first of all, you will be well aware, I am sure. That is in the early planning stages at the moment. I think that the planning application has been put into the national park authority. On that one, I am not certain on what the timescales of going through that planning exercise. Never mind the sale of the land will be, but I know that we will have the option to decide on what the deal is should iconic leisure get the plan permission that they are looking for and want to continue with that deal. Do you have an estimate of how much you think will be realised? Are you sure that you have forecast that in your accounts going ahead? We forecast in general terms our property sales. The first part of your question was how much are we anticipating for this year. I think that it is detailed in our business plan, but in total property sales and income from property comes to about £18.6 million. I think that our business plan shows that the property disposal is £14 million, as the figure is part of that, and the property income is £4.6 million. I believe that the iconic leisure one is in the low millions, possibly £2 million from memory, but I can confirm what the value is that we have put on that land in our last year's accounts. I do not have that in front of me. That would be very helpful. I just wanted to follow up on Jackie Baillie's question about the European investment fund, because I understand that that is part of the Scottish growth scheme, which was announced two years ago as the £500 million package of loans and guarantees for Scottish business, but I understand that no loans have been issued under that scheme. It is now an equity investment programme, where there is some co-investment between Scottish Enterprise and private equity fund managers, but the terms are set by the private equity fund managers. Can you give us a bit of background as to why that programme changed so significantly from a programme of loans to a programme that is effectively an equity investment programme run by private equity funds? I can talk about the European side of that, but that is just one element of the Scottish growth scheme that has got loans in it as well. I think that the Scottish growth fund is part of that as well, which has got loans as part of it. That was the element that we developed through the European side. That did not change in its formation. It was always deemed to be an equity investment when we formed it just a year ago. Of the £500 million headline number that was announced, how much has been allocated so far? Did you have that number? I do not have that number in total for the £500 million. I do not think that we are responsible for the full £500 million in there. The £200 million of that relates to the European fund that I explained earlier was £50 million from Government, matched by £50 million from Europe and another £100 million, at least probably more than that from the equity investors. Do you have a final question on this point? Do you have a timeline as to when that £200 million might be utilised? How does it match with the pipeline that you are saying coming down the track? Similar to my answer to Jackie, originally we envisaged out the £50 million that we were, but then it would be 10, 20 and 20. I think that it will take significantly longer than that, a number of years longer than that. I do not know exactly when it will be. We are at early stages on that. There is some pipeline, but one deal has been done, I think, possibly too. I want to flesh that out a bit. What are the main obstacles in matching the pipeline with the funding? Is it an organisational issue, or is it a funding issue, or is the pipeline not appropriate? We are trying to generate the pipeline for the equity investors and the European investment fund, obviously, but the majority of the money is into those cases, so they need to consider the cases that are being brought forward. We are certainly generating the pipeline for them, but that is not, obviously, seeing its way through into actual deals yet. We are working with them to try to deliver on those. I do not see any reason why that will not happen. It has just taken longer to do. Thank you. I do not know if you are listening to my questions to the HIE, but it is a very similar one. Namely, on performance measurement targets, I see in your report that there are lots of little green triangles, which I think are positive that you have either matched or exceeded your targets. Again, as with HIE, I suppose that it surprises me a little bit, because in other organisations, such as the railways, such as the health service, we do not really expect them to meet all their targets. We expect them to achieve some and miss a few. That is normal. Does it suggest that your targets are too easy, if you have met them all? It is a similar answer that I heard coming from the Highlands and Islands Enterprise. We have had the same discussion with our board and our previous chairman a number of times on this. If you asked any of the individuals in our organisation who are trying to deliver on those, they would definitely not agree that they are easy targets. If you look over the three years of the last business plan, you have seen those targets increasing year on year. If you look at the ones that we put in this year, there is a significant increase in a number of areas, particularly in the innovation side in there. We go through the year tracking these, and to be honest, albeit that we had finally achieved them last year, I think that it was up until about month 10 that we were forecasting that we would not do that in at least one area, probably two areas. The inward investment jobs, I recall, was not looking very good at one point. It was in a similar position this year, again, that they were under a lot of pressure to try and deliver on those. There is one for this year that we are currently forecasting that we will not do, but we will put an extra effort into being able to achieve that, so a lot of work goes into achieving these targets. Again, it is your own board that has, up until now, completely approved these, there has not been Government input in the specifics of targets and things? Yes. Other than the Government agreeing our overall plan that we put forward to them before we publish it at the beginning of every year, there is no direct input on to those ones other than they say that they are happy with the overall level and the overall plan that we are putting together. However, the Governance, like High, stays with the Scottish Enterprise as far as I know. Obviously, you are reviewing how you do things, but the big change will be the strategic board coming in as well. Can you explain how they will relate to you setting your plan, your setting the performance targets? Will they have a direct input or indirect, or how does that all work? Yes. We sit on the strategic board. The chairman of Scottish Enterprise, along with the chair, people of the other organisations are part of that board. What you heard from Charlotte Eirled is that they are setting new ambitions for the economic system, the collection and that family of organisations that are coming together to act much more cohesively. They are binding those organisations together with strategic targets, four pillars that you will see shortly at the end of October. They will come out with new targets and some more specific than others. They will be longer-term, some of them will be 20-year horizons, some of them will be much shorter. They, if you like, are being created, formed, shaped, influenced, challenged by multiple different bodies and will ultimately flow into the operating plans of each of the agencies. They will have a strategic shaping direction of travel influence, and each of the boards and organisations will then go into their budget planning cycle and respond accordingly. That is what we will do, as Highlands and Ireland said. They will be having a draft attempt at next year's plan at the end of October and we will be doing the same. You used a word strategic there, which is fine, so that is the bigger picture. You said that some areas will be more specific than others as to how they get involved, so I do not know if you can tell me this at the moment. If we take jobs that tend to be something that we are interested in, would the strategic board go as far as setting new jobs for the whole of Scotland, which would then be subdivided between HIE and yourselves, or would you not think that they will get into that specific level of detail? I do not think that they will get into that granular detail. I think that the example that I would give you is exporting, where we know that our foreign direct investment over recent years has been very good, but we need to begin to focus on exporting because we can do much better. Therefore, there are some emerging targets that will come from the strategic board around where we want as a collective system to try and aim for in relation to export targets. That is something that we will do as individual bodies, but we will try to bring along the private sector as well. They will have indicative high-level targets that we collectively feel are achievable, and then we will go away and work out a lot of the detail, but having been part of the creation of those targets in the first instance. You may not be able to answer that, but if we said that companies in your area are bigger and more used to exporting than in the Highlands and Islands area, would you expect that, when that overall picture has been split, that you might take proportionately more of the share to try and get SE companies exporting more? Would that just be entirely up to HIE, what they thought they could do and yourselves what you could do? In relation to exporting, we have got Scottish Development International, which we lead on, but that is a partnership between Highlands and Islands and Government and the emerging south of Scotland. Those targets will be set for each area and for Scotland overall. Therefore, that part of the organisation will try to drive collective targets. Again, I look back to individual prospectuses for each region. There are specific action plans in each area with specific targets, so it goes from a very high level down into granular level, and we will be able to give you some of that detail if that helps. Colin Beattie I would like to ask you perhaps somewhat similar questions, as I did in the previous panel, and again I would reference the David Hume Institute report, which highlighted in 2016-17 Scotland spent over £1 billion on enterprise and economic development, which is a much larger sum per head than most other parts of the UK. How can we be sure that that money has been spent on improving our economy, and how can we prove that investing in other areas that would have an impact on our economy, such as education and so on, would that be a better route? Again, it is similar to Charlotte's response. That is a matter for Government about where it places its resources to have the biggest impact on economic growth. If you are in real, maybe Linda can go into some detail, but there is no question in my mind, and I certainly have not worked across economic development over a long period of time and south of the border. There was a great deal of pain felt when the enterprise companies in that part of the world were taken away. From being in that area before, there was no doubt that stopping an enterprise agency had an impact. At a tactical level, there is no doubt that when we are landing inward investment, such as a Barclays or foreign direct investment, if it was not for us, the question would be, who would it be? Very often, the information that comes back is that these deals that attract businesses would not have happened without intervention, without people selling what Scotland has to offer. That is not just financial resource, that is the skills package, that is what other support can be provided. Let us not forget that this is a very competitive business that is trying to attract inward investment. Every country in the world is trying to attract companies who will invest in their country and create jobs for their country. If you do not have something, such as an enterprise network, you would need something else. I would respond positively and say that the answer is absolutely yes. We ought to have, we should be spending money to attract and grow our economy through foreign direct investment, as well as what we do domestically. I think that all the evidence that we would gather say that the impact that we have makes a difference. Are we spending the right amount of money? I would like to spend five times the amount, if you could help with that. That would be great. We will spend the money. We will live within the means that we are given to. We accept that money is tight across the whole economy and that will always be the case. We will gratefully receive what our Government wants to allocate to us. Our job is to make every pound count. Our job is to do that in a collaborative way with our family of agencies. That is where the strategic boards are beginning to make a big impact. We will need to respond to all those economic challenges that are coming our way, both in terms of businesses being able to respond to the economic challenges but also to the economic opportunities. We have heard earlier that we are in very uncertain times. For me, I have a sense that Scotland has not needed Scottish Enterprise more than it needs it today. I would not be surprised to hear me say that. I am an advocate for the Enterprise system. I think that it is working well. If you could find some more money from me, I would be delighted. I guess that one of the measures of how the economy is being improved is jobs, because at the end of the day, that is what it is all about. Quality jobs are extremely important. You have differentiated them by showing that it must be close to 40 per cent of the jobs that are created or HVA. Define HVA. There is a specific financial benchmark. I think that it is above £38,000 from memory, £38,000 or something. That is a financial target. Fundamentally, below that, we are for more better jobs. For us, we want more jobs and better jobs in as many places as possible, but there is a specific benchmark to qualify for the HVA. I do not know whether it is purely monetary, but that is one aspect of it. I think that the internationally recognised level for that is a percentage above the average wage rates. I cannot recall what that is, as an SDI colleague who would help us with that, but that is the accepted methodology for that at the moment. Okay, let me just move on to the question on productivity. Scotland has relatively low productivity levels compared to other countries. The David Human Institute report concluded that how well firms are managed is strongly associated with their productivity. First, I would ask, do you agree with that? Secondly, if that is true and we have such low productivity, does that mean that our companies are not particularly well managed? I do not think that we would challenge the findings. I think that they correlate with our own. For us, there are many Scottish businesses that are managed fantastically, and they are cutting edge and doing really well, but there is a lot that are not following that trend. That is why we invest heavily in leadership and management across Scotland. I think that £7 million is targeted towards that area, but there is no doubt about it that we need to be more competitive. In order to be more competitive, we need to be more productive. In part of being more productive, we need to invest more in our people, in our research and development, and export more. Like I said before, it is a very competitive global market that we are in, and we need to look out and find who is best in trying to emulate or exceed that. Productivity is a big challenge for us, so there is no doubt about it. Linkage between managerial ability and productivity? What are you doing to improve management skills in Scotland? We invest heavily in that area, and there are multiple products and services that we offer, but I will hand over to Linda. I will give you a couple of specifics. As Stee has said, we invest heavily in leadership and management, and we do not do that alone, so we make sure that we work with other actors in that space, particularly remarkable investors in People Scotland and others. We have worked very closely with the University of South Clyde around the fair work agenda and about understanding what some of those practices look like. We would work with a company about looking at what their leadership capability is and talking to them about what they need to do for the future. That might be specifically about generic leadership skills, or it could be about helping them to understand from a leadership perspective what is going on in their market, what industries are changed, what the industry changes are, what the technology needs to look like and then how are they going to cope with that in the workplace. A big part of what we do around the Scottish Manufacturing Advisory Service is about leadership and management skills, about the shift that they need to make in terms of adopting new technology, how they are going to use the data that comes out of quite a lot of those changes that they have in terms of either new pieces of kit or the kind of reports that they are getting, and then how they drive productivity improvements in the workforce, and also just in terms of how they manage the kinologistics of the supply chain. We do that at various levels and we have various programmes that do that, but we also make sure that, in all the work that we are doing at an industry level, that we are making sure that we support and enable others to do that. The productivity action plan, so the food and drink one, has very clear elements around how we are supporting management and leadership. James Withers, Charlotte mentioned earlier that the National Manufacturing Institute leadership group James is on that, again to make the link to the food and drink industry, about how we support them and how we help many of the leaders to understand the changes that they might need to make to be able to respond to what is coming in their industry, to be able to keep ahead of that. You were in for the earlier evidence session when I asked high about automation, so it is similar questions that I am going to ask. What research has Scottish Enterprise undertaken to understand the opportunities and reforms that are needed to take advantage of automation? We have done quite a lot of work, not alone. We do that with the industry leadership groups, particularly if you take the industry 4.0, particularly around manufacturing and digital. We have done a lot of research on what is going on around the world, looking at the UK level, the industrial strategy and the research that has been done there. We have begbored and stolen what already exists. We have looked at what we have already got in Scotland and then looked at where we have got opportunities in terms of capability we have got and where there are gaps, so we have looked at that across the piece. A lot of that fed into what then created the manufacturing action plan that the Scottish Government announced in 2016. We do two things around that. That manufacturing action plan is about helping industry to respond to that. There is a big leadership dimension to that that we deliver through SMAS, there is a piece in that around the circular economy. We are doing a lot around skills. That is about driving demand from companies to say, this is an issue and we need some support and it is an opportunity and we need some support. I chair across all the public sector partners that are involved in making that manufacturing action plan happen. That includes at the UK level. Innovate UK is part of that, as well as our partners in Scotland. As Charlotte was talking about, we are now accelerating towards creating the national manufacturing institute for the whole of Scotland. While the centre will be based in Shinnon, we are looking at how that will connect right across Scotland. It is going to be the harder side of that in terms of technology, but it is absolutely the skill side of that. We are working very hard about how we make sure that that connects to lots of colleges and how we get that out into schools. We are supporting particularly primary engineer to make sure that we can ramp that up right across Scotland. We have done a lot in that space in terms of understanding what is needed and making sure that we are flowing that through. On the other side of the equation, in terms of the digital piece, the internet of things and about helping companies to think about the opportunity around data and digital technologies, we are investing heavily again with our partners. The announcement that is happening in Edinburgh today around 100,000 data scientists around data-driven innovation in Edinburgh is something that we are closely involved in, that we need to support and work with. We are investing in the Edinburgh Biocorp, in terms of the application of that in health, around usher and other things, and we are making sure that we then take that out into food and drink and tourism and all those industries. We are very actively doing that at the moment and can give you lots of examples of that if that would be helpful. In your business plan, you refer only once to automation and that relates to high-value manufacturing. It says to help put Scotland's manufacturers at the forefront of digital technology and automation. However, if you look at the automatic for the people report, it highlights 20 different areas of the Scottish economy that could be impacted by automation. Transportation and storage, 56 per cent of jobs could be at risk, wholesale and retail, 44 per cent of jobs could be at risk. I am just wondering what you are doing to a whole range of business areas, rather than just manufacturing. Other than manufacturing, the piece that we are looking at around the digital economy is about understanding how technology applies right across our sectors. The automation part of the technology that we are using is automation to do that across industry sectors. From that perspective, Scotland's economy is very diverse, and that is one of the benefits that gives us resilience, but it also means that we need to help on many fronts to respond to some of those things. For example, the work that we are doing around tourism, automation and thinking about how they use that in terms of booking, around payments, about all those kinds of things that we are helping them with, financial services, automation and particularly fintech—a big opportunity that we have helped to create fintech Scotland to help to grow the cluster that we have. We know that Scotland is the most well-developed cluster outside of London, but we need to make sure that we really build on that, and a big part of that is about start-ups and how we are creating more opportunities around that. For example, in Fife, the college there is looking at a new programme to create how skills around payments, so the automation of that. In the Glasgow context, around the work that we are doing with our partners in Glasgow, we are looking at how we create capability to make sure that we can apply quantum technologies in the context of different industry, quantum computing and financial services, but also in terms of other industries such as food and drink etc. We are applying that across the piece. In some ways, thinking about demand and supply, how do we make sure that we have all the centres of excellence in academic and expert practical application? How do we apply that to all the industries that we have? We are making sure that we do both. Construction is a really good example of where we are actively doing that at the moment, and I am really happy to share with you how we are taking that. How do we create the capability and then how do we make sure that all the industries understand and we can dovetail those two things close together? I have been to the construction and innovation centre and it is fantastic. I think that it is a really good point. As things move so quickly ahead of us and change and have massive impacts, we are, as a family and a collection of agencies, beginning to collaborate more deeply. There will be the potential for us not just to provide business support in a high-quality way to all businesses, but that goes to providing consistent and clear information and insight in a real-time basis to all our business community. In that way, we will be able to give much more information, insight and support that will then drive how we invest in businesses to help them to cope with that degree of change and challenge. It is a big challenge for all of us, but the system is beginning to organise itself in a way to cope with that. On that point where you said that the system is starting to organise and there has been increased collaboration, is there a need for a Scottish commission on the fourth industrial revolution, as was proposed last week by one-air witnesses? Will it bring public and private agencies and Government agencies together to facilitate discussions about what we want to achieve out of the fourth industrial revolution? I think that that is a good idea. I think that those conversations are happening in many places and at different rates, so I think that those who are on top of it are taking advantage of it. How do you organise that conversation to make sure that it is successful to as many people as possible? If you take Brexit, for example, it is so complicated and worrying that folks will just wait to see that it is over and then try to respond to it. You cannot do it with this technology. You have to be part of it and Scotland needs to be the front wave of that. Anything that helps is that we would be very supportive of it. There are many countries across Europe that are looking at the challenge of automation, Finland, Germany and so on. How do you ensure that Scotland is at the forefront of the automation and artificial intelligence revolution? I think that we have made some significant investments and more to come in relation to the National Manufacturing Institute. That will have a huge impact, not just on the major companies, but on the whole supply chain. Those strategic investments will make a difference, but we need to work across the whole spectrum and get the whole system working. There are fabulous examples of some really exciting initiatives at the moment. So, there are huge investments going on just now. Edinburgh being the data capsule of Europe, so I know that it just trips off the tongue. When you think about what that means in the context of automation, generating the data, using the data and then driving improvements and opportunities in the back of that, we absolutely can be at the forefront of that. I think that there is a confidence and belief that goes with that and there are significant investments that we and our partners have made about creating that capability. There is no point in having the capability if companies are not using it. The other piece in the story about the connectors is that we support that and we will drive companies to help to understand that. However, the innovation centres that we invest in are a great example of the collaborative work of the family of agencies using the data lab, the census and others that do that. There really is an infrastructure now. What we need to make sure is that we are moving together ahead as a country and about making sure that Scotland takes that advantage, because there will be different bits of that capability in different parts of Scotland, but, as Steve has described, that kind of prospectus of what it adds up to can be really quite compelling. We need to make sure that we follow through on that and we make sure that we do that at scale. I think that there is a real appetite for that at the moment when I also look at the investment that is going on in the other side of the city, if you take over the other country, around Glasgow, particularly the capabilities there. There are huge opportunities and it is about making sure that we use that for all parts of Scotland, which we are absolutely committed to doing. You highlighted about Edinburgh, the data capital of Europe, Fintech and all the rest of it. Does Brexit undermine all that? Brexit is a challenge, so that is the understatement of the day. Brexit is a huge challenge, but all the conversations that we are having, certainly with businesses and with our partners, is about pressing ahead around what we think needs to be done right now. Clearly, the deal is not clear yet in terms of what that means, so we will need to watch that as it goes, but we are pressing ahead. We are not going to wait for that. The work around Fintech is a good example. We are seeing the number of what has mostly contributed to the growth of the Fintech cluster in the last year has been start-ups. We have seen some inward investment, which is great. We have not yet seen that. I do not think that we can wait for that. We need to make sure that we press ahead in terms of what that looks like. The Barclays investment in Glasgow is a very significant investment at this point in time, which spoke to us about the talent that Scotland has in that area. It talked about the support, the wrap-around from guaranteeing the skills base going forward and the competitive cost base that Scotland has. For every challenge that Brexit brings, we need to be able to help businesses respond to those challenges, but when there will be opportunities, we need to be really nimble and be able to take advantage of those opportunities really quickly. That was a good example, but it will have an enormous catalytic effect on the city and speak to Scotland being a banking centre for the future. That future proofing is really quite important. It is really hard, because we do not have crystal ball, but I really think ahead around where is automation going, where are industries going, where are the trade flows going and how do we future proof that as much as possible in the investments that we are making and thinking about where industries will be going around that and then how we use that to attract a Barclays or help companies to expand and get clusters to form around that. Particularly in that context, place making is going to be really quite important, because in all of that skills is incredibly important. All of that is the approach that we are taking around those kinds of emerging industries, but also applying that to our existing industries. Two brief follow-ups, first from Dean Lockhart and then Jackie Baillie. Thank you, convener. A number of new enterprise initiatives have been announced in the past year. We have seen the Scottish National Investment Bank being announced, the South of Scotland enterprise board. I just wanted to get your thoughts on how best the agencies, the family of agencies, can avoid duplication in effort. On the cost side, I think the estimated cost of setting up the SNP will be around £30 million. If you add that to the annual running costs of the other agencies, you are looking at roughly £130 million, £140 million a year in running costs before any actual money is invested in the economy. Is there any way the agencies together can address the cost side issue and the duplication issue? First, on behalf of the Scottish Enterprise, we are very supportive of both those initiatives, so we will do all that we can around transitioning the Scottish Investment Bank into the National Investment Bank. Those will be different things, serving different purposes. Therefore, it is really important that we manage that process really smoothly, that there is no disruption to the market and that folks understand what that change is about so that we do not have any pause in investment, so we are committed to that. It is also important that the relationship between the future national bank and all of the agencies and how we collaborate and make sure that there is a really good understanding of not just what each other does, but what is the relationship between the organisations that we are determined to do. There is no wastage or duplication or unhelpful overlap, and that process is under way. On behalf of the south, we will be really hopeful for a buoyant south. What that means is that we will want to support it. For example, we would still see supporting the south as it does high, so there is no need to duplicate a foreign direct investment capability in the south of Scotland. It already has it in relation to the south of Scotland. All of that has been worked through, but we want to be as supportive as we can be to make sure that the south can be all that it can be, and that is absolutely what we will do over the next year or so. Is there any discussion in terms of how the overall cost of setting up and running the enterprise agencies across the board can be managed? We will cost and value for money will be the heart of everything that we do, so where we can share, we will. Where we don't need to copy, we will eliminate that. So far, the discussions have been extremely positive. None of us will want to waste resource in either setting that up or to continue that, so that will be the forefront of our mind. Maybe I am reading too much into that, but your business plan seems to suggest a move away from using the term growth sectors, and you are now using the terms opportunities. Does that signal a shift, or am I just reading too much in a change of words? Well, Linda can speak to that. For me, we have been accused of being too narrowly focused on sectors, and when the computer says or the computer can say no sometimes to opportunities that folks consider could pass us by. For me, sectors will remain important, but we absolutely must be open to opportunities and we will flex our capability and resources to respond to those opportunities. That is a shift, probably. We are doing both. Sectors will continue to be important to Scotland's economy, and if you go and, for example, meet with an aerospace company, they will recognise that they are part of the aerospace sector. It is really important that we understand, as the national agency, in terms of what has gone on in those sectors, what the supply chains are and how we can support them and all those kinds of things. However, what we have recognised over the last couple of years is that the world does not live in buckets like that. Some of the things that the capability of going back to manufacturing or the digital piece of the transition to the low-carbon economy and those opportunities across sectors and what we have tried to ride both is to understand what we need to do to respond to those global opportunities around those things and then apply that and support those industries to respond to it. We are doing both. We are continuing to work with industry leadership groups, we are continuing to look at what that looks like and we will be participating in the Scottish Government review that they are doing this year around sectors. The other thing that we want to understand is all our learning that we have and any further learning in terms of particularly productivity in the high-employing and lower productivity sectors. How do you apply that into things such as the care sector or other things? What could we do in that area? We are doing both, if that helps. Perhaps a final question and your answer may be that the world does not live in buckets like that either. In terms of conditionality and putting conditions on business support to achieve specific goals such as bringing more disabled people into employment or whatever the specific goal may be, what do you think of the usefulness of conditionality? I think that the development around RSA is helpful. I think that the evidence for us is that the businesses that we have supported so far have adopted the really positive practices that we have suggested in the past. However, I think that RSA senses a different direction of travel in terms of being much more articulate around what we want back for our public investment. You will see that, for our major grants next year, there will be more thought given to what do we expect out in relation to levels of conditionality. We will drive that forward and work with the business community. We want to positively influence as best we can because that is when you get best results rather than using sticks. At some point, we will want to test whether an investment in one area yields the kind of benefits that you would get from some of those conditions versus investing in areas that might find that more challenging. However, it feels to us a big direction of travel that we would want to make sure is understood by business and that we can support business to achieve those. We are trying to make sure that we get best value for money for every pound that we spend on the right things that we have talked about. We are at the vanguard of—as a country, I do not mean Scottish Enterprise—we collectively are at the vanguard of trying to nudge things in a particular direction and in particular behaviours in terms of what we do and what we get from that. It is about judging the time when it is right to be doing things and encouraging and cajoling and demonstrating evidence and getting a group of companies, particularly that can demonstrate the benefit of that. At a different point in time, you can think about conditionality. If you do that too early, it can switch lots of companies off. It is about the balance of what we do, how we do it and the timing for that. We are always open to thinking about how we make sure that we get that right and that we do not switch things off too early, which will help us to be able to move forward around things that are quite important. Thank you very much for coming in today. I will suspend the meeting and move on to private session.