I welcome you to the 15th meeting in 2015 of the Infrastructure and Capital Investment Committee. Everyone present is reminded to switch off mobile phones as they affect the broadcasting system. As meeting papers are provided in digital format, you may see tablets being used during the meeting. No apologies have been received for this meeting. At agenda item 1, the committee will decide whether to take agenda item 6 consideration of evidence for access to Scotland's major urban railway stations in private. Are members agreed? At agenda item 2, the committee will take oral evidence from the cabinet secretary on public procurement reform. I welcome Keith Brown, cabinet secretary for infrastructure investment in cities, Paul McNulty, deputy director of the procurement policy division, Ian Moore, head of procurement policy branch and Mark Richard, solicitor at the Scottish Government. I invite the cabinet secretary to make an opening statement. Thank you very much, convener, and thanks for the invitation to come along to the committee today to provide an update on the proposals that we have for implementing changes to procurement legislation in Scotland. I'll try to outline the progress that I believe that we've made so far, as well as our current position and our plans for implementing these changes, which, as I'm sure the committee are aware, we must do by April 2016 in order to comply with the deadline set out by the EU procurement directives. The committee will also be aware that the past few years have seen a period of significant improvement in public procurement in Scotland through the reform agenda. Some members of the committee will be familiar with much of the background having been involved in the development of the Procurement Reform of Scotland Act 2014, which builds on that improvement. It also establishes a national legislative framework for sustainable public procurement that supports Scotland's economic growth through improved procurement practice and the Act, as you'll know, received royal assent on 17 June last year. Since then, work on the development of regulations and statutory guidance arising from the Act is being taken forward in conjunction with the work that's been undertaken to transpose three new European procurement directives into Scotland's law. Those directives cover public sector procurement, utility sector procurement and the award of concession contracts. The changes taken together are complex and the timetable is a challenging one, so in order to be as cohesive and as consistent as possible, we are taking the changes forward as a suite of activity. Our intention is to make the changes as simple and as easy to follow as we can for all of our stakeholders and the procurement community alike, and also to avoid where possible one set of rules applying to large-value contracts and a different set of rules applying to contracts of a lower value. We believe that that would be unhelpful to both public bodies and the business community. I mentioned that we must complete the transposition process by 18 April 2016, but it's our aim to try and do so before then, and it's our intention to lay the regulations before the Scottish Parliament before the end of this year. We've received a number of requests from the procurement community and, for the beyond, for us to allow a reasonable period of time between the laying of regulations and their coming into force. That would allow time for public bodies to make the necessary changes to their internal processes and procedures, and that's something that we'll have to look at quite carefully. Some of the changes introduced by the new directives are mandatory. They also have some elements where the Scottish Government has a choice about whether or not to or how best to implement further change. Those discretionary elements and the Scottish Government's plans to implement them were the main focus of a public consultation that we recently held on which closed on 30 April. We hope to be in a position to publish the final consultation analysis within the coming weeks and we intend to use its findings to inform the policy decisions that we need to take as we develop the content of the new regulations. Unfortunately, I'm not yet in a position to provide the committee with a copy of the analysis report, but I can say that, for those elements of the consultation where the Scottish Government set out its view on how we should best give effect to new legislation in Scotland, respondents seem, for the most part, to have agreed with our proposed way forward. The consultation might be over, but that's not the end of our engagement with stakeholders. You'll also be aware that we are required under the act to produce statutory guidance on a number of issues. We've been speaking to stakeholders about the content already and we'll continue to do so as we develop the content of that guidance. In our repeat what I've said previously in the chamber that, in respect of the statutory guidance that addresses workforce-related matters such as a living wage, we are looking to introduce that in the autumn. Alongside that guidance, we'll need to commence a number of other provisions for technical reasons. We may also take the opportunity to commence some fairly straightforward and hopefully non-controversial provisions such as the prohibition on charging companies to participate in a tender exercise. The changes introduced by the directives and the act represent a significant opportunity to make procurement easier and administratively less burdensome. As a major consumer in the economy spending around £10 billion annually, the public sector can, through its procurement policy, exert significant influence to help support economic growth. We ourselves can play a key role to promote jobs and growth, to encourage innovation, to boost training and apprenticeship opportunities, and to help Scottish firms, particularly SMEs and third sector organisations, compete effectively for contracts. I'd welcome the opportunity to engage with the committee at the stage. It hopefully provides a committee with the opportunity to understand our current position. Our attention is to keep you informed by written updates as we progress, so thank you for your attention and happy to try and answer any questions. Thank you very much, cabinet secretary. I hand over to Alex Johnson, who is going to open this session. Does the Government have an overall view on the reform package that has come out of Europe? Is it a good thing or is it just a hindrance? No, I think that it is a good thing. It really starts from the philosophy of trying to make it as straightforward as possible for companies to bid for contracts. I think that we would certainly share that aim. It takes away a lot of the previous provisions that were there before. I think that it is also generally consistent with what we have been trying to do in the act as well. Obviously, whilst we can fine-tune it and we can take some decisions, some of which are discretionary as to how public bodies grow about their business in Scotland, I think that it is largely consistent with what we have been trying to do. Does it fit well with the Scottish model of procurement and will there be specific problems in some areas in implementing it? That depends on how we go about the process of transposition just now, but I think that largely it does fit well. Obviously, we have some issues. The living wage issue has been played out a number of times in the chamber and in public debate, where perhaps we would like to be able to go further than current EU law allows us, procurement law included. I think that there are things where there are some tensions that perhaps are inevitable dealing with 27 to 28 different countries. We can address most of those through both the act that we have and the guidance that we are about to publish and the way in which we transpose them. I think that we are going with the grain of what Europe is trying to do here. You mentioned the living wage issue there. When you see that as a specific conflict between what this piece of regulation is trying to do and what the Government's long-term objective might be? No, what I was trying to point out was that we would have liked the position where we would have had the backing of European law, including European procurement law, to be able to insist upon the living wage being paid in contracts. We do not have that. It is acknowledged now every public body. Some were said to have been providing the living wage or making it a condition of the award of contracts when you examine all the examples that have been given, a number of local authorities and other bodies. That is not the case. Everyone acknowledges that you are subject to challenge if you try to insist on payment of the living wage as a condition of the contract. There are other ways to achieve that aim, which is the way in which we have been trying to work. We will make the best of that legislation to try to achieve the aim of—which is our ambition—to see everybody paid a living wage, and certainly through public procurement to achieve that. If not a conflict, perhaps European law and procurement law do not allow us to go as far as we would like to in that particular area, but we will try to achieve that by other means. I am just trying to see into the future and see if we may have any difficulties. Are there any other areas in which the EU reforms might bring Government policy into conflict with EU objectives? My intention is to try to avoid that by the action that we take now. If some of the things that we have just consulted on—some of which are discretionary—are discretionary because the European procurement body of law allows us to make them discretionary. It is possible that public bodies could end up on the wrong side of that if they do not exercise that in the correct way, but as a general principle, we are obliged to comply with European law. That is what we will intend to do. Just one final question. Why did the Government wait a year to publish its consultation while other areas, including the UK Government, have already introduced new rules? I think that we took a different approach from the UK Government. We wanted to consult because of the fact that we had just gone through the procurement reform act here ourselves. However, if you look at what the UK Government did—for example, it copied out legislation and just reproduced what was given to them by Europe in some cases—we have decided not to go down that particular route. We also wanted to take our time to consider the implications of the act and the statutory guidance. I remember when I first got this job back in October last year, I met the Welsh finance minister who talked a lot of this. She had a very high regard for the way that the Scottish Government had used procurement law for other means as a tool to achieve other things, and they have tried to reflect that in their own legislation. She compared it with, for example, the UK procurement, which is procurement in her view. I do not want to misrepresent her views, I am sure that she can speak for herself. However, the point that she was trying to make was that we have used procurement law in her view quite imaginatively to achieve other ambitions, whereas elsewhere in the UK, she has just been fairly straightforward in terms of how she used procurement law. That has perhaps reflected in the fact that the UK Government just merely copied out much of the legislation that came from Europe rather than doing as we have done. I think that it is right to consult and take people with you. Thank you. Good morning, Cabinet Secretary. Could you ask what the timescale is for the introduction of the new Scottish regulations and their implementation? Certainly. We are required to give effect to the three directors that I mentioned earlier on by 18 April next year at the latest. Our intention is to introduce legislation in Parliament by the end of this year. We are aware that some people already have asked that, once laid, there should be a gap, as I said in an opening statement, between the regulations coming into effect or the regulations being laid and then coming into effect. That was really to give public bodies and others the time to change their internal procedures. We will consider that proposal further, but we are obliged to give effect to the three directors by April next year. Could you ask what level of response there has been to the Government's consultation? Are you able, at this stage, to give a broad overview of some of the emerging themes? I have mentioned one or two of those already, but we are still analysing. There are 140 responses, I think, of 133 from organisations, seven from individuals. There has been broad consensus in some areas, perhaps as we expected. There is agreement to the position that is advocated by the Government on how to best implement the new legislation on the statutory guidance respondents have asked, not surprisingly, because those are features of the European and I think the Scottish legislation. They have asked for consistency, proportionality and transparency. There was agreement that there should be consistency of rules irrespective of the contract value—of course, there is discretion—with smaller contracts to take a different approach. Also, there was agreement by and large that public bodies should have as much discretion as possible to allow decisions to be taken in procurement exercises that they believe are relevant and proportionate to their individual circumstances, which apply at that time, rather than to have it too prescriptive. I suppose that those are the broad themes that we can identify already from the responses, but, as I said, detailed analysis is still on-going. In terms of what happens post-consultation, does that mean that tweaking the intention would be to tweak the regulations according to the responses that you get? Yes. That was the point of having the consultation. It is because a number of the areas that you have consulted on leave the Scottish Government with some discretion. It is right that we have talked to public bodies. Some of the public bodies are local authorities. They have their own mandate. They are democratically accountable. We want to take that into account. Although we have been able to identify broad themes in the responses so far, the statutory guidance and the regulations that we lay should be informed by the views. Sometimes we might not agree, but, as I said, so far we can identify some large areas of broad agreement, and that will inform what we do. To what extent do the EU reforms simplify the procurement rules for business and for public bodies? As I mentioned previously, that was the intent behind the EU legislation, but until we see how the rules operate in a practical context, it is a bit uncertain as to how absolutely sure we can be about that. I mean, one thing to say is that having taken away a fair bit of the architecture that was there before, I suppose it could have two potential effects. One is that it could free up and make it much easier for companies to apply for contracts and so on. Another way of seeing it is that it could open up areas of doubt, so it may hinder people's—it is like the old thing that you used to say in Scotland—I am sure it never happens anymore, but in local government, where somebody was making a planning application. It could often be the case in the absence of definitive guidance from the planning authority. They had to put it in and hope and see what happened. Some people liked that because it left them freedom of action, others would like to have had a bit more certainty or guidance as they were going forward, so I suppose there is always two sides to it. By and large, we have come down to the view that we want to make it as open as possible and take away as much bureaucracy as possible, but, as I have said, I do not think that we are able to see exactly what the effect of that is until we have moved forward. The commission and the member states set out with that goal of modernising and simplifying the procurement regime as a means of fostering economic growth. I think that whether it is the fact of the recession or other reasons that they have looked at procurement architecture that they had, we have all seen over the years different problems in terms of procurement challenges that have been made. Being driven by the fact that, on a period of recession, is my view—they could speak for themselves—that they have tried to make sure that we do what we can to foster economic growth. That is what has driven us to take a lot of architecture out. One of the key changes is that we can allow non-central public bodies a free hand to decide how they run certain types of competition. I think that that is no secret. That has been welcomed by many bodies so far. The only legal obligations that they will have will be to publish on certain contracts a prior information notice. That has to demonstrate that they will run the competition in accordance with the treaty principles. At the end of the process to publish an award notice, there will be very light stipulations. That is a pretty radical departure from the existing regime, which, as I have said, lays out pretty detailed rules that govern both the detail of the process and the timescales that have to be adhered to. There is a clear expectation that that change will simplify the rules for both businesses and public bodies. However, as I have said, there is a risk that it might not achieve that objective in practice because allowing that degree of flexibility in the process might make it more difficult for businesses to understand the processes in which public bodies apply. I know that that sounds a bit odd, but I think that the planning analogy is a good one. It is also true very often of the commission in the past. Sometimes Governments and other bodies took action not certain as to what the commission's response would be. If you asked them in advance to give you that comfort about what you were doing, you often got an equivocal or no response and you had to take the action and wait to find out whether it was going to be challenged. They are trying to strike that balance between making it as easy as possible, but it is giving as much guidance so that people act in the correct way. Earlier on, you talked about simplicity and simplifying things. In the document, the Governments state that it does not intend to mandate that larger contracts should be broken into lots. This is a proposal intended to help SMEs. Can the Government explain why it does not intend to do this? Surely it cannot be just down to simplicity. I think that one of the key themes that have emerged from the consultation that you have had and I think that we expected to see this was that the types of procurement activity that public bodies are involved in are so varied that applying a one-size-fits-all approach is rarely appropriate. We think that it is important that public bodies retain that flexibility to structure contracts according to their individual circumstances. Apart from anything else, I think that public bodies will often know what the marketplace is like in the area. I might want to tell the procurement processes towards that. In that context, we have to remember that the procurement reformat places a clear duty already on public bodies to consider how, when they plan their contract, they can facilitate access for SMEs, third sector and supported businesses. We believe that, in that context, a duty should help to ensure that where a larger contract can be broken down into lots without disadvantaging the authority, then it will be. I think that it is also worth saying that we have got a pretty good track record on this already in Scotland in terms of supporting SMEs. We are one of only three EU countries where the SMEs share of the public procurement market exceeds the SMEs share of the economy. I think that we have got a track record of supporting SMEs. I think that that has taken some time. I do remember in the early years of PFI and PPP that a lot of smaller companies felt that they could not act apart from the costs of bidding. The signs of the contracts were such that they had to rule themselves out and then were really consigned to being only ever subcontractors and very much at the mercy of the main contractor. I think that we have changed things quite substantially since that time saved 10, 15 years ago. I think that we have got a good track record and that is the way that the culture is just now in Scotland and that is why we have taken the approach that we have. You are comfortable enough that the safeguards that are in place will protect the SMEs from being squeezed out of the process? The safeguards and also the culture—I think that both central governments, local authorities and other bodies are now sufficiently well aware of the benefits of having a vibrant SME economy, and that will drive the change further. As I say, we have already achieved a great deal in the top three of EU countries, but I think that that will safeguard the position of SMEs. I have one last question. Are there any resource implications for either businesses or public bodies in implementing the new rules? There will be for the Scottish Government. There is no doubt about that. There are no obligations that are placed upon businesses under the new legislation. All the obligations that are brought in really rest on the public bodies in terms of how they conduct their activities. If, as I have said, the overall new regime is designed to bring in simplification and modernisation, there should be overall benefits for businesses rather than new obligations. During the first phase, the first six to 18 months, there will be obligations on public bodies to get themselves up to speed. I mentioned the representations that were received from bodies to give them a bit of time to implement the legislation and the regulations. That will involve a cost. Public bodies will have to change the processes in order to do that, but we are seeking to mitigate those costs by developing, among other things, training materials. They are also working with the Cabinet Office at UK level to take advantage of the material that they have already produced, including e-learning packages. The intention is—it would have to be the case if you have both European procurement law moving this way and the Scottish Procurement Act to try to make it easier and lighter the last thing that you want to do is to make it a burden on some process to get to that, so we are working very hard on that. Mary, you have some questions. Thank you. Good morning, Cabinet Secretary. There are a wide range of social and environmental factors that can now be taken into account in public procurement. Which of these do you think will bring the biggest change in procurement and what will the benefits be? Part of it will have to be a question of, as things go forward and how it is applied by different public bodies. We will let us know that in due course, but you are right. There are a number of different benefits. Equal labels are one thing that has been mentioned. You can take these things into account. They are a kind of shorthand way of knowing that bodies bidding for contracts have come up to a certain standard in terms of environmental practice. There are social factors, as I think you have mentioned, which I think will be tangible and measurable. We have done tremendously well in recent years in terms of professional and apprenticeship opportunities through community benefit clauses. In our view, the changes that have the greatest impact are the new sustainable procurement duty. That includes the requirement for bodies above a certain level—it is £5 million—of procurement activity to produce a procurement strategy and the requirement to report annually the performance against that strategy. That is quite a discipline on public bodies. Every year, they are going to have to account for what they have done. Also, putting that strategy out there makes it much more easy, going back to the previous point that I have made, that making it as easy as possible can also create a vacuum. One way that you can help that process is to put your strategy out there. A public body puts its strategy out there. All those that are considered in dealing with that body, apart from being able to use, for example, the PCS, the portal for public contracts, will know what that body is trying to achieve. We are looking to do some innovative things in terms of workforce practice and so on, but we, like everyone else, will have to put that out there so that everybody knows the ground rules. I think that that will produce the biggest benefits. How will you monitor that going forward? Will it be a review process? Is it possible that you may change the guidelines around what factors are taking into account and what sustainability should be done? The review process will be forced upon you because you have to report each year annually on that strategy. Obviously, you do not go into making regulations with the idea of very quickly changing them. We would not want to do that, but you have to be open to the fact that times change. The environment that we are in now is quite different from five years ago, just in terms of the economic cycle. Of course, I think that there has been a really fast pace of change. I mean that I have been involved in, whether through councils or government now for 25 years, 27 years actually, a long time, and it has changed dramatically in that period. When I first came into local government, there was a huge degree of discretion that local authorities could use, sometimes not going out to tender at all for things. Things have changed and things will continue to change. In that circumstance, of course, you will want to have the ability to revisit those things, but we are hopeful that that will be a sustainable procurement set of regulations that we will have to change them too soon. In relation to supported businesses, how do you think that reforms will work in practice? Where you have contracts can be reserved to sheltered workshops where 30 per cent of employees are disadvantaged. I have to say that it is not a term that I am particularly comfortable with using, but the word disadvantage has not been defined in the EU directive. What interpretation are you going to put on it? I think that we will arrive at a conclusion of that after we have had a look at the consultation responses in more detail, but you are absolutely right. It is a very vague term that is put on it, which you can either see as being a problem or an opportunity. You could see it as any class of employees who might have a harder time getting into the job market than others, whether it is through gender, race, disability or even other things, geographical access. It gives you that level of discretion. I think that what you would want to do is try to apply the rules or the ethos, which is about proportionality and relevance. The changes in the rulebook will substantially broaden the categories of business that can be regarded as supported and do that in two ways. One is by broadening the categories in the way that you have mentioned to include all disadvantages. Secondly, it is a reduction in the percentage of employees that fall within the classification from 50 per cent to 30 per cent. Most of the supported businesses that I have seen are probably closer to 100 per cent of the supported businesses, but there will be some or this might even provide the idea for somebody to take up the opportunity to start looking at, for example, employing people with a disability up to, say, 30 per cent of the workforce and then allowing them to become a supported business in that way. It is a factor that they have not defined as advantage. We have not defined it either, and I think that we will wait to see exactly what the analysis and the responses are before we come to conclusion. However, I think that we do want to try and see it as an opportunity. Thank you, convener. Cabinet Secretary of Publicity, I recall that there was some discussion during the course of the bill going through Parliament about the level of prescription with regards to support for supported businesses. If you recall, there was discussion over the number of contracts that public bodies should award to supported businesses, and perhaps there is also value of contract. My question is how that will be monitored in practice, as it were, for each public body to report on the level of support that they provide or the number of contracts that they award to supported businesses. On the back of that, if there is a monitoring regime going in, is there a possibility that those regulations could be reviewed or revisited, depending on the performance of public bodies in supporting supported businesses? I think that the main thing to say is that, as I mentioned, bodies above or procuring above a certain level of £5 million will be required to have their strategy publicly issued, and they can have as part of that strategy, of course, that element of it, so that would be a way to achieve it. I think that what you have seen not least through the Parliament is quite a number of events. I was less aware of the early developments of the procurement reform act to be involved in a different area of government, so you tend to get a bit focused on the area that you are involved in, but I think that we have all been to a number of events here in the Parliament where supported employment has been at the centre of it. The annual procurement reports that I mentioned, which the contracting authority is required to prepare or revise, and it is important that maybe that goes to the second part of your question that they can revise their procurement strategy. In relation to financial year, it must provide an annual procurement report on its regulated procurement activities, and it has to include a number of things, including the summary of the community benefit requirements, but also a summary of any steps taken to facilitate the involvement of supported businesses in regulated procurements during the year, so they are going to have to report on this in any event, and I think that that itself will help to drive change. That is an annual thing on which they will have to report as well. How will the reforms on use of labels like fair trade work in practice, and what benefits do you see that the reform is bringing? The labels themselves have to carry credibility, but they can be a very useful way to avoid substantial tick box exercises that companies will have to go through. It is a kind of shorthand. As far as I am aware, and perhaps Paul or other officials could mention, it is not prescriptive. There are some that will be understood whether it is fair trade or equal labels. You could see, for example, I would imagine a development of a fair work label, which would, I suppose to some extent, that is what the business pledge that we are trying to encourage people to sign up to is a kind of shorthand way of saying that this company adheres to certain standards in terms of fair work. However, I do not know if one of the officials wants to comment. There are provisions in the new EU directives on labels, but they come with a number of preconditions. One of which is that the label, if you like, must be relevant to the characteristics of what you are actually buying. That presents certain challenges when you get into issues like fair work or fair trade, because quite often the schemes relate not to the characteristics of what you buy, but to the circumstances in which they are produced. We are looking at this carefully. We will see what guidance we can issue when the new rules come in, and we will do whatever we can to promote fair trade. However, I do not think that the changes in the new rules are a kind of panacea that will all of a sudden say that you can specify fair trade labels without having to go through some of the things that the existing legal framework requires you to go through. Do the preconditions overcomplicate things and make things more challenging? In a way, arguably, they merely clarify what the existing legal position is on the back of a European case that involved a Dutch authority that sought to buy fair trade coffee. What that case said is that you can specify the characteristics of what you require, but you cannot focus in on a particular labelling scheme in isolation. You have to leave it open to other participants to be able to demonstrate that they would meet the same criteria. What the new directives do is go a little bit further and say that you can actually refer to labels, but those labels have to be relevant to the characteristics of what you buy. That presents a challenge when you are looking at labelling schemes that deal with the way that a producer is rewarded. What approaches does the Government tend to take in the options for exclusion of businesses and the grounds of tax evasion? The first thing to say is that the approach that you have to take is legally defensible. That is quite important. The options that we have in relation to that would fall into two categories. First, whether or not we want to, through the regulations and so on, make particular discretionary grounds upon which you could exclude a business from a tendering exercise, you could make it mandatory for public bodies to do that. Secondly, whether or not to replicate the same rules that the directive makes for higher-value contracts, make those rules also applied to lower-value regulated contracts. The proposals that we have set out in the consultation paper are broadly that those grounds for exclusion—I think that you mentioned tax evasion—which are at the discretion of public bodies should remain so, because making those mandatory for other bodies would place them at significant risk of legal challenge, both from those companies that claim to be wrongfully excluded and those who claim that competitors have been wrongly included, one company or another should have been excluded. There is also that question of proportionality. In addition, we also propose that the same rules should generally apply to lower-value regulated procurement exercises as well as to higher-value exercises. That was largely for reasons of consistency and for insuriums, a proper transparent process. The response to the consultation that I said in the analysis has not been completed, but it was overwhelmingly supportive of our proposals. Trade unions, of course, are of the view that those businesses that transgress in any way should not be allowed to win public contracts at all, non-payment of tax. However, non-payment of tax, where it has not been bolstered by a legal process where a company has not been found legally to have not paid tax, is a key example for the trade unions. Firms that are in bankruptcy or in solvency proceedings have also been raised an area of focus. 71 per cent of our respondents agreed with our proposal that public bodies should still have discretion over whether or not to exclude such firms. That is partly a reflection of the fact that we can all know from our own constituency examples of where a company might be in that situation, and we want to try and safeguard the jobs that are there. Allowing discretion for the local bodies is important. We have not finally decided on that, but that is the thinking and the process so far.  I am talking about the Scottish Government contract. Let us take, for example, the ferry contract next year, which should not have got particular interest in. When you are carrying out the tender exercise, how do you ensure that the firms who are tendering have no skeletons in their cover? For example, there have been tax avoidance within the EU, which has gone through a legal process. There have been tax avoidance outwith the EU, which has gone through a legal process. There have been breaches of health and safety where a worker may have died or been injured. All those factors can be proved because it has gone through a legal process. Even the Scottish Government does not have perfect knowledge. Sometimes it is very difficult to determine what has happened to a firm. How secure can you be, particularly for a high-value contracts, that there is not skeletons and cupboards for potential bidders? It is a good question. You have identified the fact that there is a tension between trying to find out everything that you possibly can about a company and trying to have a process that is open to companies and that you can get through. A substantial amount of diligence has already been done in terms of financial and other statements that companies, including those that are bidding for the ferry contracts, have to go through. That will be bolstered by the legislation and the regulations that we intend to have. However, you are right, you cannot have perfect knowledge. I think that there is a good example without being too specific about it, another ferry contract that recently happened. In fact, another rail contract that recently happened where one of the companies concerned had been debarred by the UK Government from bidding for public contracts. In short, beforehand, it was un-debarred, if you like, from bidding for those contracts. Certainly, from the Scottish Government's position, we felt fairly safe if the UK Government said that this company cannot bid for public contracts. We could say, no, you cannot bid. When that was lifted, it is very hard for either the Scottish Government or another body to say, no, you cannot bid. You are open, the contracting authority is open to legal processes and potentially claims of compensation for despairing. You are right, you cannot have perfect knowledge, but I think that even before we go through those processes in terms of regulations, we have got pretty stringent processes for making sure that that is the case. You have probably rightly predicted that, as an example, I was just going to give. If you are going through a procurement process and your officials have been looking at checking the background of the company and they get a clean bill of health, then subsequently you find that there has been a problem such as tax evasion in the EU, have you the ability to pull them from the bidding process once that tender process has started? I will ask the officials to come on this, but we already have, because of the rules that we have around, say, for example, blacklisting, the ability of any contracting authority that finds, for example, a company with blacklisting to just take the contract away from it. You already have that ability, but I do not know if the officials want to come on in the back of that. It is standard practice to make it a condition of participation that you actually tell the truth as a company. If you find out subsequently that they have not told the truth, then there are certain steps that can be taken. I have to say that it has not happened in my experience. The blacklisting issue that the cabinet secretary mentioned, the guidance that we issued to public bodies in 2013, recommends that they include a clause in the contracts that specifically says that, in the event that you are found guilty of an offence connected with blacklisting, that would be the 2010 UK Government regulations, then the contract can be terminated. There are things that can be done if you find out that someone has not told the truth, and it is standard practice, certainly, for our larger value contracts, to issue pretty dire warnings to companies of what the consequences will be if they do not tell the truth during the process. I notice as well, again, taking the new fairly contract next year, and there is a break clause introduced in those contracts, so that, if you do subsequently find that there are problems, you can pull that contract halfway through the term. Quite often there will be break clauses in contracts here. I have to say on the general issue of perfect knowledge, when the concept of mandatory exclusion was introduced just over 10 years ago at the European level, at that point in time, the European Commission had on the table a proposal to create a pan-European database of relevant offences, but I think that that just died of death, given the complexity that the commission was finding in that project. I will not extend the debate, because I know that time gets on, but certainly I remember having meetings, in fact, I think that there was this previous committee when we met a European commissioner talking about contracts. What was quite interesting from the commission's point of view was this idea. Well, that is all fine and well, as the commissioner was saying, but this is a state issue. It is really up for you as the member state to carry out these obligations. I think that there is a general rule. Sometimes we are far too dependent on getting legal advice handed down. My experience of these things is that there is a halfway house in many other European countries. Frankly, take the ball and run, but it is not totally clear, unless the lawyer here will testify. The law is not always totally clear when it comes to EU. I sometimes think that we are a little bit introverted when it comes to going ahead with what we feel is right and not necessarily getting our hand held by the commission, but that is perhaps another argument for another day. Can I perhaps just ask then about blacklisting since the cabinet secretary mentioned it? Do the new regulations from Europe give us more clout to ban firms that have been blacklisting? I think that the directives give us that opportunity to do that, but I will go back to your latter point. You are right to say that sometimes it is possible to be too inhibited by what the EU might do. It is also true to say that that applies to the UK Government. If they decide to take a different approach, they are the state, and if we take the wrong approach, they do not like it, then we have to have regard to that as well. These are not matters without consequence. You can have a contract having to be run that can cost you several millions of pounds, the disruption to individuals, so I think that you are right to say that, not to be too inhibited and sometimes to stretch these things as much as you can. In relation to blacklisting, as you asked, there are no substantive changes in the new directives, but we are taking the opportunity and drafting the regulations to make it very explicit that breaches of employment law over which, of course, we do not have control, but that includes the 2010 blacklisting regulations, which have been mentioned, are to be regarded as grounds for exclusion. In addition, we have also given the STUC a commitment, and I have given it to them myself that we will work with them and other interested trade unions to agree what that guidance should say, and, as I have mentioned, we expect to publish that guidance in the autumn. I agree with your point about the member state. If there is a potential conflict with the Scottish Government of whatever political complexion is a disagreement with the UK Government, surely that is an issue to be raised by the joint ministerial task force Europe? I mean, that is what it is set up to deal with. If you had experience personally of being on that task force and making the case for a different view from Scotland from the UK Government? The joint committee, I have been on the committee before, but there are, of course, external affairs ministers who are involved in that. Actually, that probably would not always be the best route through which to try and make sure that there was no legal dubiety. I do not think that, incidentally, it is necessary the case that there has to be two different parties at UK and Scottish level to find a disagreement. Certainly not in the early period of 1989-2007, when I was involved quite a lot in the European side of things, there was disagreements then. I think that it is trying to make sure, just as I was saying before, that you can try to eliminate uncertainty, because uncertainty will inhibit people's actions. So, if you can make it as certain as possible without being prescriptive, that has got to be the best outcome. Yes, of course, but not necessarily through the joint committee on Europe. We will have discussions with the UK Government on those things. I find the question that Alex Johnson has touched on this already. That is the whole issue about living wage. Does the new procurement firms help to take contracts that give a bit more clout that there should be living wage? I know that there has been some advice that we have received from Europe. For example, putting it into a contract, the expectation is that the winning bidder will pay the living wage. I mean, there is, as you know, a legal form of words that can still comply with directives on this. Yes, but I think that the point to be made is that you cannot stipulate, you cannot make it a condition of the contract that a bidder pays living wage. Now, you will know as well as I do, and I am glad to have the opportunity to say this. In the chamber, it is often being alleged, for example, the Government and my party voted against having a living wage. It is not possible to do it. Other places that have said that they have done it, including a number of boroughs in London and, I think, other local authorities, have been proven that that is not the case. They have now come forward explicitly and said that they recognise that they must act in a way that is compliant with European law. I think that we have moved on to that ground where we know that we cannot do it, and what we are now looking at is what provisions allow us to try and achieve that without stipulating it. There are a number of different things, so the workplace reforms, the workplace things that you can take into account, and some more general things that you can take into account about economic benefits of awarding a contract in a particular way. It has got to be relevant, it has got to be proportionate, but if we can say that people being paid a living wage makes that contract more sustainable, then we can achieve that as we have managed to do within the Scottish Government. We can actually achieve that aim through a different process. For example, in a competitive dialogue type of negotiation for tenders, as you had for I think the Northern Isles, is it not possible to make it clear to everyone bidding that the expectation of the Scottish Government is that the winning bid will pay a living wage? On which contract, sorry? If you take the Northern Isles contract, which I think was a competitive dialogue method of discussion. Well, only in as far as you cannot be in a position of making it too clear to them, that really their bid depends upon them making a commitment to pay a living wage, because that way you are acting in a way that is going to get you into a breach. They can take action against you. If you were to, for example, not give them a contract because they did not give you that commitment, they can take action through the European processes. It is how you can use other methods to achieve that, and if you can make a case for saying that it makes the contract more sustainable, it has got to be proportionate. Perhaps the officials would want to come in this, but... What we have actually done is published guidance to the issue last year that basically says that you should take account not just of the living wage, but of a bidder's general approach to how it treats its workforce. I think that is important because you could be a living wage paying company and still not be a particularly good employer because of other terms and conditions that apply to your workforce. We are strongly recommending that wherever it is relevant to the quality of service that is delivered under the contract, that public bodies actually take account of workforce matters in general. Within that, we piloted that approach on our occasion contracts, and all five shortlisted bidders came forward with a bid that said, we will give you a commitment to pay a living wage. It seems to have the desired effect where it is supplied. I am convener. I take Mr McNaughton's point that just because you pay a living wage does not meet you as the best employer in the world. My experience for what is worth the due movement is that it is unlikely that rackman-like employees do not tend to pay a living wage and then be very poor in other years, but I bow down to a different view of the world. Our guidance actually says that payment to the living wage, we regard that as a key indicator of whether you are a good employer. It does not the only indicator. If we are just coming to the last point that Dave Stewart makes, it is the case even very recently that a public authority has tried to ensure that a living wage is paid, has achieved that, and subsequent changes, for example cutting of hours for the employees or other conditions of service, have happened. It is always difficult to say whether it has happened as a result of the company paying a living wage. The approach that you have taken in the Scottish Government, the contract that was mentioned, is designed to try to stop that happening. It is possible that, even if you are not a rackman-like employer, it is possible to accept that you are paying a living wage and then denude the conditions of service for employees. Just one last example, the cleaning contract was mentioned. The biggest contract we let is the rail contract. We managed through that to get not just all directly employed individuals, but also every subcontracted individual, including cleaning, catering staff, to be paid the living wage. The other thing that it says, of course, if you get the living wage paid, the real benefit for those companies is that, by and large, people who are being paid the living wage need to spend all the money that they have, and they will spend it in the economy, and that increases discretionary spend in the economy, which is beneficial to companies and the economy generally. I agree with that. I think that the jargon is a virtuous circle. A good run, David. Thank you, convener. Can I just on that question of the living wage? The Scottish Government has made it clear as a Government that is committed to paying the living wage to its own employees. If I have understood you correctly this morning, you said that you would have liked to have made it a stipulation of contracts when awarding contracts that contractors pay the living wage, but the European Union legislation prohibits you from doing that. Am I right so far? Yes. I think that we are pretty clear that we would be challenged on it, or susceptible to challenge at a European level if we were at mandatory. Do you happen to know that officials explored the issue of whether the member state, which I accept is not Scotland in this case, would the member state, or any member state, be able to seek a dedication on something like this? It's a good question, I don't see officials. Yes, we've had those discussions with the Cabinet Office of the lead UK policy department on public procurement, and they share our view of the legal position. We've also had discussions with the European Commission about the issue, and what is clear is that those member states that have tried to make payment of wages that exceed their local minimum wage, set by statutes, have found themselves in the European Court of Justice. There are three cases to date, and another one in the pipeline that we expect a judgment on this year, and all of the judgments have gone against. Would you be able to share that information with the committee to inform our understanding of the issue? Do you think that it would be possible for the UK member state to seek a dedication from the legislation? No, the reason it's not possible to seek a dedication is that the fundamental issue, despite some of the cases involving the posted workers directive, which could be repealed by the commission if they had the will to do it, is not that that will exist, so far as I'm aware. However, the fundamental issue here is the treaty. You would have to reopen and rewrite the treaty in order to get over the European obstacle. Why is it possible for the UK to have dedications on other issues, such as the social chapter, but not on this issue? Because the obstacle here is the fundamental treaty principles of free movement of services and free movement of workers. Are we happily linked to the committee on this? It's tend to be one and lost at the point that the treaties agreed, so the Danish have had dedications. The more important point, perhaps, convener, is that the UK Government could right now make an obligation that living wage is paid simply by making sure that the national minimum wage is a living wage. If we had the power over the national minimum wage, we could raise that to a point of being a living wage. If I could just add, I mean, that's exactly the point here, and one of the reasons the commission tends to view this whole issue as an issue for member states is there would be absolutely nothing to stop the UK Government, if it wished, actually setting a national minimum wage that reflected local regional, you know, devolved administration priorities around what they wish to pay. And the UK Government is entirely free to set whatever level of national minimum wage it likes without infringing EU law. The EU law position is that having set a minimum wage in statute, you can't then actually set a higher hurdle for participation in public contacts. Okay, thank you for that. I'm going to move on. Mike, you have the final questions. Thank you, convener. Good morning, Cabinet Secretary. As you know, I'm a firm advocate of using technology to boost our efficiency and productivity, so I wonder if you could describe the governance approach to implementing the requirements on e-procurement and what work needs to be done by public bodies and businesses to ensure that Scotland's ready for the implementation, I think, in 2018. I think we are well placed because of the actions that have been taken so far. I think the Parliament's a very good example of an e-environment, if you like to call it that. The things that we've done up to now mean that we're well placed, but there are new obligations. Some of the examples that we already have is that there's a comprehensive suite of e-commerce tools, including an e-ordering system, which is in use by around 100 public bodies currently, and which currently processes around £5 billion worth of transactions every year. The e-commerce systems, for the most part, are operated as national shared services, and they are essentially funded by the Scottish Government. While the financial memorandum of the act, as you mentioned, identified the need for further investment in Scotland in some staff to support the development of those systems, as I say, we are satisfied that we are at a pretty advanced stage in terms of that development, in terms of being at an advanced stage of readiness for the implementation of the new act, so we welcome it. I think that it goes with the grain of what we've been doing for a number of years, and we don't foresee any problems in us implementing the act. Final question. Are there any other particularly novel or significant aspects of the new procurement directive, or any other directives on utilities or concessions that the cabinet would wish to highlight to the committee? I don't know if the officials have anything to add, but the one that's different, I suppose, because it came from the UK Government, is the idea of mutuals, for example. Social enterprises, where the UK Government, through its big society initiative, has sought to move some public services or allow public services to facilitate them to be delivered by social enterprises. We don't have that view, so we don't intend to push in that direction, and I think our guidance that we eventually issue will reflect that, but that's a fairly novel thing. I'm just trying to think of anything else. That provision that I mentioned is limited to circumstances where, for example, the social enterprise, which is bidding for the public works, has not had a similar contract from the public body in a previous three-year period. As I said, it was negotiated by the UK Government in order to facilitate its broader policies, but we don't share that policy objective. Although, as a possibility in some limited circumstances, it could be of use, I think that the UK Government has also excluded health services from that provision as well. That's the one that stands out to me, and I don't know if the officials have anything to add to that at all. I think that one of the other ones that's probably worth drawing the committee's attention to is the obligations in relation to enforcement and monitoring of procurement and activity. The new European directives place an obligation that an organisation in Scotland should monitor how procurement rules are being followed and will have to publish the results of any monitoring on a three-year basis. It will look at things like confirmation, which is often done incorrectly or causes legal uncertainty. I will also talk about the level of SME involvement and information on preventing, detecting and reporting on procurement fraud. One of the options that we asked in the consultation paper was what sort of body should that responsibility fall to. The suggestion that seems to come back at the moment is that the Government's single point of inquiry, which currently resides in the procurement directorate, is a place for suppliers and buyers to seek advice where there are concerns about procurement rules, should be an option that should be considered as taking on this responsibility. In addition to the monitoring, one of the other elements that we have to consider is that we will need to ensure that the new directives have some form of remedy applicable within them. Currently, the remedy process in Scotland is an application to the court and it is court action. Again, we are seeking views from stakeholders as to whether that would be appropriate to take forward in the new directives or whether there should be some sort of alternative or something sitting alongside or perhaps below an action into the court such as a tribunal or a non-busman. Those are options again, which we are considering as we look at the analysis. Are there any final questions from members? Cabinet Secretary, can I ask you to give a commitment to the committee that you will keep as updated on the outcome of the Scottish Government's consultation on changes to public procurement rules in Scotland and to do that prior to the publication of the regulations? I think that when I am opening the statement, we do that. We keep the committee up to date, so I am certainly happy to undertake to give that commitment. I thank the cabinet secretary and our witnesses for their evidence this morning, and I will now suspend the session briefly for a changeover of witnesses. Good morning. At agenda item 3, the committee will now take oral evidence from the cabinet secretary on Glasgow Presswick Airport. While Keith Brown, cabinet secretary for infrastructure and investment in cities, is remaining with us, I welcome Mike Baxter, director for finance and analytical services, and John Nicholls, director aviation, maritime, freight and canals at Transport Scotland and the Scottish Government. Can I invite the cabinet secretary to make a brief opening statement? Thanks, convener, and thanks for the opportunity to update the committee on the recent progress at Glasgow Presswick Airport. I think that you last received an update on the 12th of November, and since then a number of changes have been made to create what we believe is the right structure to take the business forward so that it can be returned in due course to the private sector. Members may recall that we appointed Andrew Miller formerly of Air New Zealand in November 2014 as non-executive chairman of both the holding company for Presswick and the operational company. More recently, in the last two or three weeks, we have appointed four non-executive directors to help to take the business forward, and those non-executive directors were selected because each one of them had a particular set of skills and a track record in the key areas identified by ourselves and others to help to take Presswick forward, including communications, property, engineering and marketing. On the passenger side of the business, Members are aware that Ryanair has increased its overall presence in Scotland, operating out of three airports rather than two, which is good news, of course, for Scotland, but it has meant a reduction in the number of Ryanair passengers travelling through Glasgow Presswick. Projected passenger numbers for 2015-16 are 782,500,000 compared to 1.58 million last year, and the team at the airport are working hard to try to secure growth in passenger numbers with other airlines, both scheduled and charter. On the cargo side, projected tanage for 2015 is 11,670,000, which represents a 3.4% increase compared to the last year. In relation to financial support, which another committee was interested in, £6.3 million was loaned in 2014-15. That loan was less than we originally earmarked because the company achieved additional income from windfarn mitigation, from the Bristol lease, and on a slower development of some capital expenditure. £10 million loan funding has been allocated in the current year, and of that £10 million, £2 million has been drawn down so far. We have always been very clear that Glasgow Presswick is not a typical airport, and it will rely on the development of a wide range of business opportunities to make it successful. Since the last update, progress has been made in some of those areas. We have always acknowledged that the former Deputy First Minister and now First Minister has always said that this is a process that will take some time. The Presswick board has decided to establish its own fixed-base operation to handle business jets, military aircraft and the like. That is a decision that has been seen as being better commercially for Presswick. That was a significant change as the service was already being carried out by two companies, and it was necessary to end their lease at Presswick. Since that change, Presswick has seen a significant improvement in both aircraft movements and revenues, which are up 74 per cent compared to last year. The airport has attracted to other new businesses. I mentioned Bristol's helicopters, constructing a new hangar for their sector and rescue operations, and the Trump organisation, based on aircraft at Presswick. Finally, the committee members will be aware that Presswick is on the shortlist to become the UK's first spaceport. John Scott secured a debate in the chamber where he and others highlighted the potential Presswick offers in that regard. The airport has put in place a big team headed up by Stuart McIntyre, who I have met and discussed this with and who, to me, is very impressive. That team is working closely with the local authority, the South Ayrshire Council, the airspace, businesses around the airport and the space industry worldwide to put them in a good position to develop a robust and compelling bid. Members will also be aware that the owners of Campbelltown airfield are considering a bid as well. Although it remains the case that more than one Scottish side is in the running, the Government, of course, will remain neutral, but, as I said in the debate that John Scott held, I think that Presswick is in a strong position, particularly given the amount of effort, care and thought that they are putting into the process. We remain of the view that it will take time to turn the business around. It was on a trajectory before we stepped in to take it over, but we believe that that can be done, and that both Presswick and the business around it can thrive in the future. I want to explore a bit more the issue around loan funding, because you gave us a very brief update in your opening remarks on loan funding. Would it be possible for you to give us a figure of projected loan requirements for the airport? I think that what we do is put in place facilities for a certain amount of loan. I will talk a bit more about that in a second, but it really has been at the discretion of the business as to how and when they draw down that facility. We previously announced that £25 million in loan funding was available. All that funding incidentally requires to be repaid, and we require to make a return on that investment. Four and a half million pounds was loaned in 2013-14, and that was the first year of the Government's ownership. Six point three million pound, as I mentioned, was loaned in 2014-15, which was less than the £10 million allocated. It just underlines the point that I was trying to make, is that although we can put in place these facilities and we go through a process of diligence before we do that, it really is up to the company as to when and how much of that facility they draw down. During that year, last year, the airport achieved, as I mentioned, additional revenue from commercial activity, and the £3.7 million remaining has therefore been carried forward in 2015-16. The 2015-16 provision has been made for £10 million plus that £3.7 million carried forward, and, as I said, around £2 million of that has been drawn down so far. We have made no commitments beyond this year, but we will be keeping the situation under review, and I am happy again to update the committee as and when we reach conclusions on what further loan funding might be made available. The £25 million that you mentioned is that the maximum amount of loan funding that the Government is prepared to commit to presswick airport. No, we have taken a judgment based on what we think is necessary and also what the discussions that we have with the airport have taken forward. If we were to go any further than that, it would be on the basis that we intend that the monies will be repaid, and that involves a calculation that the airport has a future trajectory that will allow it to repay that money. That is the basis on which current loans will be made, and it will be the basis on which any further loan funding will be made. As I have said, the loan funding that we have made available already, if you go to the airport you will see the improvements that that has managed to achieve. However, as I said, the rate of that will depend on the airport's own decisions, and any future funding will depend on the discussion between the airport and ourselves. Audit Scotland recently estimated that a loan funding of £39.6 million would need to be made available to presswick up to 2021-22. Is that a figure that you disagree with? I am not sure that that is exactly what Audit Scotland said, but I don't want to come in. I am happy to comment. 39.6 was the projection that Audit Scotland had reported. I think that the point that the cabinet secretary has made is that we will need to continue to monitor the position, because the profile of that drawdown is up until 2021. As the situation develops over the intervening period, we will keep that under review. It is important to say that we are not simply reviewing a one-year position that we are continually reviewing the long-term business plan with the airport and to have a presence on the board at the airport. I have just mentioned one of the points on that. Audit Scotland made its own calculation of what the necessity was and also made some comment about passenger numbers, which you might come on to. There are other things that play here. For example, in relation to passenger duty, that could change both the requirements for revenue and passenger numbers. I think that we are happy to take it in the stage way that we are just now. I move on then to talk about passenger numbers. It is a very challenging situation for Presswick Airport. In a way, it is good news for Ryanair, because they are expanding into other airports, but that has a significant impact on Presswick. The drop in passenger numbers is around £360,000. What discussions have you had, or will you be having with Ryanair to try and look to build passenger numbers into Presswick? Those discussions would necessarily have to take place between the airport directly and Ryanair, and those discussions have been taking place both before and after and during the decisions that Ryanair have taken. Ryanair have said that they remain committed to Presswick, and they have substantial operations, aside from the passenger traffic that they have there. Ryanair, as I am sure, is changing its business model in any event, so there are new opportunities there. I know that the management of the airport has been very assidious at looking for new passenger businesses and working very hard on that. I would hope that they would be able to come forward with positive progress in relation to that. Those are pretty commercially sensitive discussions that they need to have with Ryanair and other potential users of their service. The other point, which I know has been made before, is that there is quite a number of different facets to Presswick. It is quite an unusual airport in that sense of fixed-based operations and so on. The maintenance and the freight of a different character to other airports, so it will not just be on that. However, the discussions that you have asked will be taking place between Ryanair and the airport. I come on now to ask about freight, because freight has decreased at Presswick airport, although it has started to slightly pick up again. Between 2003 and 2013, freight tonnage fell from 40,000 to 10,000, but I note from your opening remarks that it has started to pick up. How significant to the future of Presswick is freight? You are asking me quite rightly, and I think that I would have to give my impression of that. I have not had a discussion with the board. I think that it can be very substantially significant. The reason for that is because I think that Presswick has a very good reputation in the industry and the way that it turns around freight. It does so very efficiently, and it has a growing reputation for that. There are some other challenges because of some other flights that have come in, and the tendency these days to put freight into the belly of aircraft was your carrying passengers. However, you are right to say that there has been an increase, a 3.4 per cent increase between 2014 and 2015, in getting towards the 12,000 tonnes. I had a bit of a discussion with them. One of the things is that they will want to increase their intelligence as to where opportunities for new freight are. Sometimes the information that they get can be a bit ad hoc, say from truck drivers in the area, who will tell them about different businesses or freight carrying that they are involved in. I think that they will want to improve their intelligence as to what the opportunities are. However, that is an area in which the reputation that they have already got, both increasingly with the military and domestically, presents a real opportunity for them. Perhaps we are seeing that in the change, the 3.4 per cent increase that they have had. Of course, the cabinet secretary will know that the committee has just recently finished an inquiry into freight. One of the things that we looked at was air freight, so it might be possible with the recommendations from our inquiry that Presswick might benefit in some way from all of that work. I would hope, and I do not know if it is the case that the board at the airport and the senior officers have had a look at that, but if not, we will certainly make sure that they get a copy of the committee's recommendations. Yes, but that was still a draft. Can I just finally ask you about the railway station? The last time we had an update on Presswick in November 2014, we were told that the railway station is an important part of the picture, as it is one of the biggest selling points for the airport, but it needs substantial capital investment. Has any capital investment been earmarked for the railway station? If not, why not? I have to say that that has got to be a decision for the airport themselves. You are right to say that anybody going past the airport can see that it is in need of at least refurbishment. It is unique in the way that the ownership falls to the airport, obviously. What I have done is made sure that, from my point of view, the airport is well aware of the different funds that are available from the rail franchise, so the £30 million stations investment fund is there. However, they would have to make a case for that, but I have to say that it is quite right that the airport themselves look at what their capital investment priorities are. They might not be able to do everything that they want to do at once, but if they want to come forward and be an applicant for the railway station's improvement fund, they can do that, but it has got to be them who take that decision and it has got to be based on what they think are the capital priorities. The work that has been done into the reception areas, the retail opportunities there, they may have seen that as a bigger priority at that stage. I have mentioned what loan funding we have made available, possible other sources of finance, but they have to take that decision. One question for you, cabinet secretary. It is about the four non-executive directors that you mentioned have just been put in place. Are they the final senior appointments to be made? If so, are you satisfied that suitable governance arrangements are now in place to return the airport to profitability? Yes. To each of those questions, that series of appointments completes the board structure for the airport. I spoke to each of the appointees before I appointed them or agreed to their appointments. Yes, I think that they have a breadth of experience there, particularly in relation to marketing, which is very important for the airport, but also in relation to governance. I think that that breadth of experience is something that I am very hopeful will really help the airport to move on to the next stage of its development. One of the directors has got a tremendous experience in the south of England, in the ports, moving from a situation of being a public authority to a private, back into the private sector. Having spoken to each of the non-executive directors, there is a real breadth of experience there, but that does complete for this stage of the airport. Vacancies can arise, but that completes the board appointments at the stage. Minister, I wanted to address some of the issues that were raised in the Audit Scotland report. I note that the Audit Scotland report indicates that the purchase business plan identified average annual growth in passenger numbers of 10 per cent or that order in each of the first five years. However, we know that passenger numbers have fallen and continue to fall at the moment. How have your officials assessed why those predictions were so inaccurate at the beginning of the process and why that might affect future plans? I do not accept that they were inaccurate. They were certainly different and much larger than the UK Government's 1 to 3 per cent forecast, but they were consistent with other forecasts on a wider level. The Audit Scotland report also said that, even at that lower level, the business case had been made for a positive decision to take the ownership of the airport. The figure that we provided was done by our expert advisers at the time of the purchase. As noted in the report, it was, as you have said, growth of 10.2 per cent in the first five years. It was later devised and, of course, we did not pick and choose the timing of having to take over the airport. That was presented to us by market conditions, so those things were done in less than ideal timescales. I think that that has been acknowledged. However, the senior adviser that we appointed reduced that figure to 6.5 per cent when he was able to put together the stage 2 business plan. The committee and I drew comparisons between those figures and, as I mentioned, the DFT's aviation forecast for the whole of the UK. However, I mentioned earlier that one factor that that did not take into account was the impact of APD. The Government's commitment is to reduce by 50 per cent in the next Parliament the impact of APD with a view that public finance is allowed to eliminate altogether. Ryanair and many other people have pointed to the substantial growth that could engender if we were able to do that because of the inhibiting factor of the highest APD in the world just now. I do not accept that those factors were unrealistic, although they were forecast made based on the information available at that time. It is also worth saying that, in comparison to the DFT stats, they have the primary purpose of passenger forecast being made to inform long-term strategic aviation policy. Also, the DFT's own guidance says that making any prediction about the future is inherently uncertain, especially if that is true in aviation. The report places more weight in the role of those forecasts in informing long-term strategic policy than in providing detailed forecasts. Specifically for presswick, the DFT report shows potential growth to 1.8 million passengers in 2020 and 2.6 million passengers by 2050 from the baseline in 2011 of 1.3 million. We have asked about our assessment of passenger growth projections. I think that it was reasonable at the time based on the best information available. Our forecasts of growth in passenger numbers were lower than those of many passenger aircraft manufacturers boeing in airbuss among those that are a bit higher than the DFTs. When Audit Scotland recalculated the financial return, as I have said, using that less optimistic prediction, the model still showed a positive return being achieved. We still consult on the way in which we are talking to the airport management themselves. I have mentioned about the efforts of the airport management to increase passenger numbers, and we have seen the effect of the Ryanair decision to disperse its business across three airports in Scotland, rather than two. However, we continue to look at those. The Audit Scotland report recommended that the Scottish Government develop an exit strategy that identified a timescale for privatising the airport. Has any action been taken to prepare such a strategy? We have said from the very start that we took ownership of the airport that was our intention to return it to the private sector at the most opportunist and earliest opportunity, but we believe that there are too many variables—some of them I have just mentioned—that it would not make sense for us to be specific about a date. I have mentioned the air passenger due to its use to go back to it again. If that changes quite dramatically the fortunes of the airport, then, of course, it could achieve that position much more quickly. I do not think that it makes sense, given that that is just one variable. Others have mentioned the spaceport. If the spaceport bid was to prove to be successful, that could have a transformative effect on the airport, so we do not think that it is sensible, given those variables, to put a specific date on it just now. I just wondered that it might be a worthwhile juncture for the Cabinet Secretary just to remind us what the consequences would have been had the Scottish Government not taken Prestwick into public ownership? It is worth saying that, if you look at the number of people directly employed and those indirectly employed, it would have had a massive effect on both the local airship economy and the Scottish economy as well. There was nobody dissenting from the point of view that we should take the airport over. It is not something that we wanted to do. We own a number of airports, but they are small airports that are vital to local communities, so we do not want to be in the business of taking over an airport. However, I think that over 3,000 direct and indirect jobs were put in jeopardy by the closure of the airport, so 3,000 jobs has a massive effect. Trying to replace those jobs in a place like Ayrshire would have been extremely difficult. It is quite easy, subsequently, to look back and say, well, maybe you should have let it go, but if you think about some areas that have suffered massive job losses in the past, how difficult it has subsequently been to try and get that critical mass to get those jobs back, I think that it was the right decision to take. Had it not been taken, those jobs, to the extent that the people that have them were not able to find new employment, would then be being paid from public funds, substantial moneys, in terms of unemployment and all the other things that that brings. I think that it was the right decision to take. The minister has mentioned, on more than one occasion, the opportunities of the reduction or ultimate removal of air passenger duty, but I have asked this question before and I will ask it again. How can the reduction or removal of air passenger duty be a positive for Prestwick in competition with Glasgow and other airports? Is it not simply the case that it will boost air travel generally but has no specific benefit for Prestwick airport? Ryanair, I cannot bring it to mind when the officials will know, they have been very specific I think about what they calculated that it would mean in terms of Prestwick specifically. However, you are right that there is a general benefit. For example, the York aviation study showed huge benefits. Aside from those, I am sure that we can get the details of Alex Johnson. People know that we know anecdotally that countries such as Mexico and other places are taking plain loads of passengers who are now going to Paris rather than London or going to Milan or to Rome rather than London—not to mention Glasgow and Edinburgh but especially London—because, often, 300 people coming on a plane to discover a new country are going elsewhere now because of additional costs, both of visas, which has been mentioned, but also APD. It puts you at a competitive disadvantage. It means that some people are leaving Scotland to go to Dublin if they want to fly to Dubai so that they can avoid the long-haul passenger duty. I think that there is no question that it would benefit Prestwick. However, you are right to say that it is also a general benefit. We have specific figures from Ryanair and others that mention what the specific benefits would be for Prestwick. However, I undertake to provide a member with any specific information that we have on that. It was more a point of information. Ryanair's figure was that it would put a million new passengers through Prestwick Airport if there was a reduction of air passenger duty. That is the figure, as I recall it. Your officials will probably know it exactly, but I would be fully in support of the reduction of APD. John Swinney? That million figure, I think, went out to Scotland as a whole. Obviously, that would include a proportion of passengers at Prestwick. However, as the cabinet secretary says, we will double-check exactly what Ryanair has said and report back to the committee. Will you do some work on what the general uplift that we think we would see would mean specificity for Prestwick? However, I think that there is no question that it would be transformative for Prestwick. I will then take the point, cabinet secretary, about the impact of air passenger duty reduction and stimulating passenger trade in Scotland. The other factor is looking at route development funding. Do you recall that you kindly offered me a meeting about that, which I will take up once I have had some European advice? Do you recall that the Government withdrew that funding, which was brought on, I think, by the Labour-Libdom Administration in the second session? I think that the problem was compliance with EU rules. As you know, I have looked at that. Currently, under 1 million passengers is the sort of de minimis level, and others it does not really apply to airports under that. I note from the figures in the brief that Ryanair is currently 500,000 passengers. I will pursue a meeting with you, and I know that you cannot magic a new policy overnight, but route development funding helped develop over 48 routes when it was brought in by Labour and the Lib Dems. Clearly, APT+, having a better marketing strategy for which Government can help, would stimulate trade at Prestwick. Is it something you will have a look at in the longer term? The final point is that the UK Government brought in the connectivity fund, and I note that the de minimis level there is actually 5 million passengers, which is 10 times more than Prestwick currently has. I am not convinced that Europe is the problem here. I think that it is about looking at other sources of funding that helps to stimulate smaller airports. I appreciate that we are not talking about the Glasgow and Edinburgh airports here, but we are talking about smaller passenger throughputs. Just to say on the route development fund, the advice that we got was very clear, and that would fall foul of Europe. I think that it may have happened before 2007. I could be wrong, but I will check that fact out. There is no reason why, if we were not allowed to do it, we would not continue to do it. Obviously, it requires a budget commitment, but there is no reason why we would not do it. It is worth saying as well that we do help all of our airports. We have to be careful as to how we do it. I will often take the form of marketing and other support, but we do help our airports. We are doing that. I will go back to an earlier question in relation to Prestwick as well. Prestwick will have the discussions with the airlines that they want to attract, but it will often involve a discussion as it happens with Glasgow, Aberdeen and Edinburgh as to what the Government can do to help support that. That support is still available. Your point about the numbers at the minimus level will certainly look at that and come back to you. However, if there is a way to do that, we are very keen to increase, in particular, long-haul and direct flights because it stops the more environmentally damaging shorter flights. It is obviously better for customers. I am off to go on holiday soon and I will have to go to Gatwick to fly to where I am going. You can cut out those damaging journeys in between time, plus it is better for people. We support that, and you have seen tremendous growth at Edinburgh, Aberdeen and Glasgow in recent terms. We have been involved in many of those things, so support has not stopped for the industry. If you look at the UK connectivity fund, that operates up to 5 million passengers per airport, so I am no European lawyer. However, how is it that the UK Government has managed to get the scheme through that operates to Scottish airports that have a bigger turnover than Prestwick? If it operates effectively for the UK member state, why is it not effective for the Scottish Government to operate them in the same rules? I am happy to look at that. The officials did not come and speak to that, but I know that when it was announced completely out the blue, nobody had a clue. If you ask people in Vanessa airport, for example, nobody had a clue what the scheme was going to do or how it was going to work. It has taken a bit of time to achieve that, but I do not know whether the officials want to come. The Secretary is absolutely right in that some of the application of the DFT scheme has been not very clear. It is something that the Prestwick management team has been pursuing with airlines, and that is what they are saying to us. There is a lack of clarity around the terms of the DFT scheme, and we will obviously help them to pursue that and see if we can take advantage of those particular things. Perhaps the Cabinet Secretary could get back to us, convener, on this particular point. I do think that there is a good example of the UK scheme, and I am not convinced by the de minimis argument, but let us get a letter back from him. I do not think that, just to say that it is necessary that the de minimis argument is being made, it is a scheme that was introduced or announced overnight with no guidance behind it, which then had to be something that we have worked through by airports and also by civil servants, but, yes, we will come back to you in the latest section. We are still not happy to do that. I did have one more question. I hate to burst the bubble because it has been so optimistic past exchanges, but the Audit Scotland report pointed out that the original business case for Prestwick suggested that it would not be viable without Ryanair. Is the minister in his department still looking closely at what it would have to do with Ryanair were to withdraw completely? I am sorry to have to repeat the point, but that calculation has to be one for the airport management. We are obliged to be one to move from the management of the airports, but, of course, they look at different scenarios. However, I think that they will be comforted by the fact that Ryanair have made a very positive statement about their future at Prestwick, and it is not just down to the passenger side of things. However, I know the information that I have. I know that they are not sitting on their laurels. They are working very hard to get other business to the airport. As I have said, when Ryanair made their announcement, they made a long-term commitment to each of the three airports that they currently serve. I do not think that it is an immediate threat, but I do not think that any officials want to add anything to that. I agree very much with what the cabinet secretary has said. Although Ryanair have reduced their operation at Prestwick, there are still 55 flights per week this summer. That is a reduction from last year. They have the substantial maintenance repair and operation there, employing several hundred people. I know that the Prestwick management team is doing all that they can to enhance Ryanair's experience at the airport and to pursue the Ryanair offer of increased services when the market conditions permit. In parallel with that, the airport team is pursuing a number of other opportunities with other airlines, which are commercially sensitive. I am afraid that we cannot say too much about those just now, but the airport management team is conscious of the need to ensure that they pursue all the business development opportunities that Prestwick has to offer. On that point, one of the things that they do at Prestwick is commercial airplane pilot training. That is done for Ryanair as well as Jet2, Thomas Cooke, Loganair, Virgin Atlantic, EGJet, and others. The other thing is that they have had a real success this year in terms of their interaction with the military. The joint warrior defence exercise, the big NATO exercise, happens twice a year. There has been a huge improvement in both aircraft movements and revenues since press work aviation services were brought in, as I mentioned. However, the joint warrior exercise feedback has been excellent for the military, so very good prospects are building up business in the future. It is quite lucrative for Prestwick. The point is to make that they have a broad base, probably broader than most other airports. The question is trying to raise it all. They do not anticipate a withdrawal from Ryanair and they are doing what they can to make. As John said, Ryanair's experience is as good as possible with a view to trying to expand that, but they are also looking at other airlines as well. Thank you very much, convener. Obviously, there are commercially sensitive initiatives happening in terms of trying to increase business in the airport, but have Prestwick managed to be able to attract any new freight or passenger services to the airport since our last update in November? I think that the freight figures that I gave earlier on were not available at the time of the November update, that 3.4 per cent increase, so that is obviously new business that is there. I have mentioned some of the other new business that is not necessarily freight in terms of the aircraft movements for the military, the search and rescue for bristows and one or two other things. In relation to passenger services, as John said, for each of the airports that he worked with, they are extremely sensitive and confidential, but I know that they are putting every effort into trying to attract new business. I appreciate that. You touched on the training of pilots and engineers and the maintenance, repair and overhaul work. How has this been pursued and what success has been in attracting new business to the airport in this area? I have mentioned a number of the areas. I think that there is increased freight coming in from around the European continent. There is quite a substantial amount of oil-related freight that is being used as well, and I am trying to expand that, but I do not know whether John or Michael want to see more of those things. In terms of additional services at the airport, as you said, there has been an uplift in freight. There has been the substantial increase in fixed-space operations and the Trump organisation aircraft, which the cabinet secretary mentioned. In terms of the MRO opportunities, there are a number of potential business development opportunities there, which I know the Board are pursuing. Those are, as I understand it, extremely commercially sensitive at this stage, so I do not have any further detail than that. There are things that are being looked at by the management team very actively. It is worth saying as well that that area of business in terms of aircraft movements and so on, the revenues are up 74 per cent this year, and a similar gains since last year have been made both in February and in March, so it is a promising area of activity for that. That was in relation to the military activities that have been going on, the servicing or the accommodating of aircraft and so on, so it is a growth area for them. You can imagine from where the joint warrior exercise takes place how convenient it is for the military to use this week. In terms of the reduction in passenger numbers last year, the loss in revenue from that has been more than offset by the diversification into those other areas. The overall turnover for the business remains pretty much on track with what we had for the strategic plan. Okay, that is encouraging. Cabinet Secretary, you mentioned capital investment priorities error on in relation to the issue of the rail station. Could you give us an update on progress in capital investment in the airport, please? Certainly, and I know that the member and others will be very familiar with the airport and its condition recently. Having had a tour of the airport and its associated facilities recently, there is a lot of opportunity for capital investment there, if I can put it that way. The board is shortly about to be asked to agree a capex for resurfacing work for sections of the runway, the taxiways and the aprons, and replacing sections of the terminal glazing at the front. That is about £1.2 million. We have a new body scanner, which became operational in April, building on the cabin baggage x-ray replacement programme. That cost £0.5 million, and certainly when I last visited the airport, it improved quite substantially the security arrangements that are there. They are also investing in a new information centre, which will consolidate car parking, car park management, lost baggage, ticketing and passenger information. There has been recladding work to the departure gates pier, which will be completed next week. That cost around £285,000. In respect of radar, a wind farm mitigation solution procurement is in progress, and that should be concluded by the end of September. As I mentioned, that was one of the new areas of revenue, so very important that they get that right. The airside tax-free retail area, which I mentioned earlier on, has been redeveloped and modernised, and that brings the facility up to modern standards. We will provide a more attractive offering for passengers. The cost of that redevelopment is around £3.25 million, so a lot has been done. There is a need to replace the primary radar system, as well as the mitigating wind farms, and that is a fairly major investment that is required. Has any scheduling of that work been done so far? Perhaps officials could answer that. I am afraid that I am not a radar expert, Cabinet Secretary, but what I do know is that at the last board meeting that I attended at Prestwick, there was agreement to the budget going forward, and that would have included the capital plan and all the various activities under that plan. If it is helpful to the committee, I can go back to the airport management team and confirm what the position is on the renewal of the primary radar system and write back to the committee. It is not on our radar just now, but we will get back to you in a minute. I will let that pass. On the operating costs of the airport, can you give us an update on the progress in reducing the operating costs, including any savings that may have been made to date? The due diligence has shown that undertaking the time of the acquisition showed that Prestwick was being run efficiently and that there was little scope for cutting operating costs, but the management has sought out best value and efficiency. The team at the airport is working with procurement colleagues in the Scottish Government on both policy and a wider approach to procurement. One of the things that was post-acquisitioned was that the airport was able to enter into a larger utilities framework agreement, which is obviously beneficial. In terms of staff numbers, they are fluid because of the seasonal nature of the business. The head count has reduced as follows. Summer or May 2013, 364 staff, a year later 361, a year later 342, so a 6 per cent reduction since purchase. In winter 2013 there was 325 staff, in winter 2014 297 staff, so a reduction of 8.6 per cent. As I said, at the point of acquisition, our advice was that there was not huge scope for reductions in operating costs, the big push is to increase the revenue coming into the airport. On workforce matters, is Prestwick airport a living wage employer? As part of the pay negotiations between Prestwick and the unions, it was agreed that the implementation of the living wage would be discussed at future wage discussions. That was a two-year deal that runs from 1 April to 31 March, so it is on their agenda to do that at Prestwick. David Cymru, you heard earlier that Prestwick is one of the five bidders to host the permanent UK spaceport, which is all very exciting. I know John Scott had a high-profile and champion Prestwick. I have always felt that it is sensible to link Scotland to the moon, which is a good advertising slogan. Could you perhaps indicate what the update on the airport's bid is to host this very interesting and novel UK championship? First of all, some of the promising aspects here are true of any airport that is bid from Scotland. Recently, I was in Canada in a company called Comdev, which produces the satellites that go into space. In fact, it has been doing it for 45 years without one being malfunctioning. It has acquired a company in Newbridge and West Lothian in Edinburgh, which produces elements from manufacturing that are important for the space industry. There was an announcement just last week about investment in Glasgow in terms of a space company. Of course, it has the aeronautical related businesses around Prestwick, which are obviously beneficial as well. From the discussions that I had with Comdev and MESL, which is a company in the bottom of West Lothian, they are looking at massive expansion because they have what they call constellations of satellites being put into space now. That general background is very promising. It is obviously why the UK Government has felt that it is necessary to develop a space port in general. As you have said, there are five shortlisted by the UK Government. The others are Campbelltown, Stornoway, Newquay and Scuse of Pronunciation clan bar. There are five in the shortlist. We do not know how many out of that five will choose to develop a bid, although we know that the operators of Stornoway have decided not to develop a bid. Just to speak about Prestwick, they have in place a team charge with developing its bid. We know that preparatory work is well advanced. It is working in conjunction with the range of local partners, including South Ayrshire Council, Ayrshire College and a range of aerospace businesses to help to develop a very strong bid. It is carrying out significant work to build support among the international space community. I know that they have been to the States, both the east coast and the northeast and down to Florida. We are waiting further detail, crucially at this point. We are waiting further detail from the Westminster Government on the technical and other criteria that will be set. It may be the case that the five that I have mentioned reduces further once you see the technical requirements. The timing in the process is in the hands of Westminster. I can say that Prestwick is very well organised, and we are confident that it will be able to submit a very strong bid. However, like any other aspect of the business, securing the spaceport needs to be done on a commercial basis, and it will have to have a return on any investment made as well. Thank you, cabinet secretary. You will know that I have got a regional interest with Campbelltown, which I should declare. I will bring in Adam specifically, and then John on the spaceport. I am still on the same issue. As I said, I have got a regional interest in Campbelltown. Is there any discussions about having a joint bid with Prestwick in terms of a Scotland United bid, albeit in two sites? There have been discussions about how the two Campbelltown and Prestwick could jointly go forward, but I do not know whether John has more up-to-date information on that. Yes, I can confirm that there have been discussions. There was a meeting in the last couple of weeks between members of my team, Scottish Enterprise, Highlands and Islands Enterprise, and representatives from both Prestwick and Campbelltown. One of the outcomes of that meeting was that the two airport teams were going to have a further discussion about possible collaboration on a joint bid. Obviously, we will keep the committee updated as that progresses. I am very grateful for that last response. I suggest something along those lines in the members' business debate that John Scott proposed. I am pleased that that is happening. Up until now, the Scottish Government has said that we are neutral because we have a number of bidders. Being neutral does not mean that you are inactive, though. I suggest that. It certainly would appear to me to be a good idea for the Government to facilitate a Scottish bid, as it were, hopefully incorporating the best elements of all the barriers. Is that what you have in mind? That decision has to be reached by the two airports. There are two reasons why we are neutral, one because we should be neutral as between different interests in Scotland. However, with Prestwick Airport, we are the owners. We cannot be pushing forward our airport that we own at the expense of other airports, albeit the relationship that we have with Campbelltown. We have taken that neutral approach, but you are right to say that we have not been inactive. The Government agencies that are relevant here have been put at the disposal of any bidders in Scotland—Scotland Enterprise, Hans Development Enterprise—to help them out as much as possible. We have been as active as we can be. Whether they come together has to be a decision of both the airports. However, as John has mentioned, there are some promising signs that they might do that. You would not need to be neutral any more. If there was one Scottish bid, we would push as hard as we possibly can. As we are doing with them individually, we would push as hard as we possibly can with the UK Government to try and ensure that it succeeds. John, do you want to go in on this one? Thank you, convener. Although I pay tribute to my colleagues in the committee, I have already asked all the questions that I might have asked by and large. Have you had any discussions, cabinet secretary, with the new UK Government about this, even if Campbelltown and Prestwick are in contention, about perhaps both of them being the preferred option for the United Kingdom jointly or separately? I think that the discussions that have taken place have really been about trying to understand the process. I do not think that John can come in and confirm this. I do not think that we would have a discussion about a potential joint or sole bid until we know that that is to be the case. However, everyone is waiting for the technical information to come from the UK Government, which will help me to make that decision. I do not know if there has been any further discussion. I myself and a member of my team went to see DFT officials at the end of May to try to get some clarity on the process, as the cabinet secretary describes. We still await the Westminster Government providing further details of the specific criteria and the bid process. Until we get that, it is very difficult for any of the potential airfields to take a view on how best to frame their bid. However, we will continue to offer all the support that we can from Transport Scotland and the other agencies to any of the airfields in Scotland that want to pursue the bid process. Thank you. David Boyd, you just asked about Stornoway. You know that I have a high regard for Hyal and have visited most of the airports and have a good relationship with Hyal management. Clearly, Stornoway is a vitally important airport and is part of the Hyal group, but clearly you run Hyal. Was there any discussions, advice or guidance to Hyal management to say that Stornoway should be taken out of the bidding process, or was it purely and simply done by the management of Hansaas airports? No, there was no instruction given and we don't run it. We do on it, as you say, but it is run by people that you know at Hyal, and they came forward. I will just confirm with officials that there was no instruction given by me for them not to run that. They took that decision, I don't understand what you want to add, John. That is absolutely right. The view of the Hyal board, and they said this publicly, is that they considered this and decided that they wanted to concentrate on their core business at Stornoway. There were some practical issues around the use of airspace, which the current scheduled services at Stornoway might have been disrupted by its use as a spaceport. In all those circumstances and also having regard to the resources that might be required, the board of Hyal decided not to pursue a bid for the spaceport. That is useful to put that on the record. Can you move on to wider issues about Prestwick? Are there any plans to realise the value of the airport's land and property assets that are not required for aviation purposes? You are right.  Some surplus land around the airport has already been sold and the business intends to keep that under review. It is worth noting that when we bought the land, it came with some pockets of land that are not in the airport boundary itself, some of which were originally bought for car parking. From the company's point of view, they give careful consideration to ensuring that any sale of land does not adversely impact on other long-term aspirations, one of which we have just been discussing in terms of the airport and spaceport. As I have said, we have a new series of non-executive directors, and one of them has very particular and broad experience in property in particular, and she will be able to offer a new source of advice and expertise to the board, so I think that that is an area that is worth keeping an eye on. I think that that is a sensible point. You do not want to sterilise future development if you sell off land that you then need for the spaceport. It would not be too clever, so I hope that I can understand that. The final point. What are the key priorities for the strategic and operating company boards for the current financial year? Just very quickly, on the last point, Bristol has obviously taken a bit of land there for the search-and-rescue operation, and that is providing a source of revenue, so that is exactly the kind of thing that I want to see. However, the priorities of the board are obviously to continue to develop and implement the corporate business plan and to grow all the different aspects of the business, including passengers but also charters, the fixed-based operations and cargo. And other priorities include, as I have just mentioned, the Bristol search-and-rescue hangar being completed and continuing to develop that bid for the spaceport. However, it will also be proactively seeking new business opportunities, so they will consider all credible business propositions. I get a lot of them sent to me, incidentally, which I just passed straight on to the board, obviously. So there is a great deal of interest out there in people looking at doing business at Presswick. Thank you. I thank our witnesses, particularly the cabinet secretary, for this evidence session and also the previous evidence session. I will now suspend this meeting to allow for a change over our witnesses. Thank you very much. Thank you. Thank you for the session and can I welcome Sarah Boyack MSP, who will be joining us for this agenda item. Agenda item 4, the committee will continue to take evidence for its piece of work on access to Scotland's major urban railways. Can I welcome Phil Verster, managing director and Susan Anderson, route commercial manager of the Network Rail ScotRail Alliance, Aidan Gricewood, director of rail at Transport Scotland and the Scottish Government. Can I ask Mr Verster if he would like to make some very brief opening comments on the nature of the alliance between ScotRail Abelio and Network Rail? Yes, convener. First of all, thank you very much for the opportunity to give evidence at this committee hearing today. So, we have formed an alliance between the Abelio ScotRail train operating franchise and the Network Rail Scotland route. And what that alliance is, is basically bringing two businesses together under one senior management team and one managing director. And the focus of this alliance is to basically make the railway better for Scotland, better for our communities, better for our people and better for our customers. And we've got a very exciting programme over the next couple of years. That includes bringing in 234 new electric vehicles, significantly more services, 25% more services in the central belt and to places like Stirling, Dunblane and Alloa. Bringing in intercity service, multiple offers for our customers that are cross-modal in nature. And to be honest, a really exciting programme for our customers in our communities. And one of the big focus areas for us is to improve our focus with stakeholders, our focus with customers and to improve our railway. And in terms of one of the principles that we've set for our business, which is about putting the customers first, the focus on stakeholders, every stakeholder throughout our community, whether it's community rail partnerships, whether it's RTPs and whether it's councils or local authorities is to build relationships that allow these stations that you have been taking evidence on to be managed to the best interests of the communities we serve. And so we're very exciting about this programme and we'd like today to give some examples of where we know we can do things differently and some examples of where we have done things differently already. There's a lot of interest in today's evidence session and a number of people will be watching members of the public and stakeholder organisations. So just for clarification, are you able to speak on behalf of Network Rail in terms of this piece of work into access to Scotland's urban railway stations? Yes, I am. That's fine. I just wanted to be clear about that. There is some confusion amongst those who are watching our proceedings today. Okay, we're going to move on and the first questions are from Adam Ingram. Thank you very much, convener. Now during the course of this inquiry, the committee has heard that there's no single organisation responsible for co-ordinating accessibility improvements to Scotland's railway stations, even when they are undergoing major regeneration or improvement. Which organisations should be responsible in your view for this work and why is such co-ordination not currently happening? Yes, thank you very much, Mr Ingram. I think when we think of the integration of transport options across stations, some of the evidence that have been given of correspondence where Network Rail has indicated that Network Rail does not have that strategic transport integration focus may not have been that helpful. I also think it's not that helpful to think that a single organisation has that transport integration responsibility. I think what is essential to get this right and I think the Sostrans view was expressed really well when Sostrans said there must be a seamless passenger experience. That is what we should aim for. Now what clearly needs to be achieved is a mechanism according to which this can be made to work. When we talk about a mechanism and trying to identify a single organisation that's accountable, I don't think that's the way we should do this. I think what we should be doing, we can have a simple mechanism that just says who's accountable for getting it started and that we must identify amongst us. But then the success of getting integration right and that seamless passenger experience is about intent. It's about how a business is run. It's about how all of us work together and it's about common sense. I think one of the important things that we are doing in the Alliance now for the last month since we formed the Alliance now is we are focusing all of our business plans on putting the customer first. If I take how big projects work, big projects has a client or a sponsor which now for the last month would be part of the Alliance. With us putting the customer first I would expect us to play a very different role than what we've played in the past that we would be able to facilitate exactly that type of discussion and that even though some parts of large projects sit outside of the Alliance currently because we look at the operation of the railway but there's still network rail, big teams that do the Egypt work and the Queen Street work, those teams take their guidance from what our sponsors in the Alliance say. So the Alliance has a key role going forward looking after both the ScotRail bit of the business as well as the Scotland route side of network rail to set that involvement and create that involvement which I think going forward would be different. If I add one more thing with the Ingram, I think what is really important with these schemes such as Waverly and Queen Street is that these aren't just railway schemes. This is not just about the railway. It's about this community that it falls into. It's about the city that it affects. It's about the town it affects. It's about the flows of traffic, the flows of people. It's about business opportunities. It's about opportunities to leverage in more funds and to integrate the development plans. I think we realise that and I think going forward what you will see now with the role we want to play as an Alliance and the role we will play as an Alliance is that we expect and we will pace things differently and in Queen Street's example for example would be a really good example of where the teams are setting about now with a focus to create an integrated approach. So you've obviously heard the evidence that's come to this committee and particularly regarding issues like the metaphorical red line around railway stations that local authorities in particular have been frustrated and not been able to influence or even have appropriate communications between people who are developing the station and public transport out with the grounds of the station. Do you foresee then or is one of your tasks in your new coordinated approach will be to address those issues? That will be one of your priorities to tackle. So by saying this is a really good question yes and if I can say the convener has summarised it I think as the three Cs of collaboration, coordination and the third was consultation and I think those three Cs becomes the essence of what we need to get right. So if you think of the red line in the sake of Queen Street perhaps just clarify that Queen Street has got sort of two consultation types of processes going on. On the one hand there's a transport and works Scotland order which has got very clear consultation duties and requirements to statutory consultees and that becomes a red line area for particular reasons because it's about ownership and it's about compulsory ownership for a part for geographic area and then I think there's a consultation another consultation process we can call it a consultation with a small C but as important which is not about the that statutory process to secure ownership of a piece of property but it's a process about creating that seamless interface and to answer your question then the answer is yes. I do think we have a critical role to play there but I just want to make it really clear that not the alliance, not network rail, no individual organisation can get all of this right. It needs the intent and it needs the collaboration and it needs the commitment from all the parties and I think that would be there personally but everyone has a role to play and the thing is when you look at different cities and you look at different developments you have to have different approaches. If you look at the good work Dundee is doing with regard to their development and the types of decisions we have made there are different to the decisions in Waverley and are different to the decisions with Queen Street and I just think this is about finding ways to work together to create solutions rather than sort of targeting one organisation to carry the burden of all of the integration if you follow that question. Mr Verster you said that some of the evidence wasn't helpful and yet witness after witness after witnesses come to the committee and each and every one of them almost exclusively said the problem in having a proper dialogue, proper collaboration and so on has been network rail. Now I can understand why you may feel that somewhat unhelpful and it seems from what you've said that suddenly you've woken up and realised in network rail that things can't go on like that. Why weren't you able to put into practice all the virtuous things that you've just weighed out before the committee today? Thank you Mr Mackenzie. The bit I referred to that was not helpful was the network rail correspondence that I referred to so I didn't refer to any of the submissions by other witnesses to not be helpful. I've personally followed the information presented and the evidence presented to this committee carefully over the last couple of weeks and personally think all of it's helpful. I think some of the correspondence that have changed between businesses was not, we could have done this better. I'll give you an example. Sustrans was at one stage engaged with correspondence from us that looked as if it was the type of correspondence we said to a member of the public. While Sustrans is not a member of the public, they are an influential stakeholder which we should have approached differently. So my view is, Mr Mackenzie, very very clearly is that we have a different business now. We are setting up the alliance as a different business. We have a very significant relentless focus on the customer and maybe if I talk about the rail industry a little bit to just answer that question. The rail industry a couple of years ago were fragmented and with different parts of the railway industry being in different parts all over the industry, there were practices and ways of working that developed with certain customer focus ideas which are different to what we as people that want to serve the end customer, the fare paying customer think. And one of the things that Transport Scotland and the Scottish Government has put together is this alliance idea which is leading, I think a leading concept in the rail industry where we bring bits back together again and say have less interfaces and focus on the end customer. And so that's what we're doing. Can I take that as a commitment then from Network Rail that you will have a more constructive role within the alliance in the future than we've seen in the past? You can absolutely take that as a commitment. Thank you. OK. Can I say maybe a potential change in practice? Can I give you a for instance here? The committee has heard evidence that the Scottish station fund cannot be used for improvements to areas immediately surrounding a railway station even when they are focusing on improving the accessibility for customers to the station. Is this, in your view, a correct state of affairs and would you like to see the fund criteria being revised to allow it to finance such improvements? So thank you Mr Ingram. So first of all I do think that the station fund can be used for applications which the rules that governs the fund allow for. So I think what's really important when you look at the station fund and when you look at City of Edinburgh submission to the station fund, we have a very clear set of rules according to which Network Rail which is not a funder, we're just administering the fund and Aidan may talk later about how the administering of the fund is getting changed according to which the administering of the fund is executed. And the administering of the fund in very simple terms is about doing stuff that helps the railway and passengers. Now rightly or wrongly that's what the fund is focused on. A very important part of that fund's concept is that anyone that wants to use parts of the fund must get their own development and feasibility work up to a stage of maturity that the fund can actually say yep that's £1.7 million is exactly or whatever the amount is is exactly what is going to require because that's a mature design so that the fund doesn't sign up to a £1.7 million estimate that turns into a £17 million estimate later on which happens with these capital projects. So it's really really important that whoever makes an application to the fund actually does that ground work really really well. And I think the question relates to Haymarket so I'll just answer that question if you don't mind and say that we have worked closely and we will continue to work closely. We're the city of Edinburgh Council to look at issues like an access from the Dalry side and to look at what the possibilities are of better access for cyclists and we will and we have to because we've just opened this week we've opened our bike and go scheme at Haymarket and we've rented our first bicycle out at Haymarket. It's really exciting for us so we want to continue these relationships and develop this but the station fund is has got huge demands on it. There are new stations in the offing that may be built from that station fund and I just think the station fund must be approached within the governing rules that are set out for it. Do you have something you'd like to contribute Mr Grayson? Yeah just to support what Phil was saying there. In terms of the station fund we've essentially in terms of the criteria that's something that Transport Scotland have approved too and there's some important principles around the fund first is to make sure that we maximise the impact of the fund and that requires so the emphasis on leverage so third party funding elsewhere as well to ensure that we get the most out of that fund because as Mr Verster pointed out there's a limited budget so ensuring that we do that is a key principle. I think the second key element is that ultimately this is a fund that is borrowed as part of Network Rail's regulatory asset base and is therefore subject to regulatory rules about ensuring that what is undertaken through the station fund is condemiserably and value to the rail passengers. There's a set of regulatory requirements about the sorts of things that can be specifically funded by a station fund and those are set by the Office of the Rail Regulator in terms of the asset base and what borrowing can be undertaken. I think thirdly I think just back to the previous discussion about you know if you like the red line issue I think there's an important distinction between the engagement that needs to happen and is actually actively encouraged through the station fund in terms of participation of local authorities, RTPs, other third parties and the value that's placed upon third party contributions and demonstrably showing that this is consistent with local plans, regional plans and national plans and secondly the actual funding around that so I think it's an imperative and let's already talk about this in terms of ensuring that we get all of these these this is an opportunity just like a major station development it's a huge opportunity presented by funding to actually get parties together work collaboratively think about how the overall end-to-end journey can be improved for the benefit of the passenger and similarly with the station fund it's an opportunity that's presented it's a you know a reasonable slab of money committed there to improve stations but it's all about bringing people using that as a means of bringing people to sit round and think about what is best for the end to end journey and that means you know working very closely with local authorities RTPs in terms of them putting together proposals but ultimately you know the funding that can be presented through the station fund has to be predominantly for the benefit of rail passengers so I think if we're talking about things like road improvements and the like then that's clearly out with scope although I think those sorts of investments made by third parties would be very positive in terms of demonstrably showing that leverage is being brought and the max end-of-station fund is maximising its impact. Okay thank you we're going to move on to the issue of access to Enver Waverly and David Stewart is going to. Thank you. On the theme of consultation and communication why was vehicle access to Enver Waverly station removed? So in in May last year that access for road vehicles to the concourse area was removed and it was removed at ver