CONTENTS

PROGRAMME

"Opportunity challenge - achieving sustainable economic growth"

Discussion Sessions

Further details on this and previous Business in the Parliament Conferences can be found on the BIPC website at:

http://www.businessintheparliament.org.uk/

ALPHABETICAL LIST OF DELEGATES WHO REGISTERED TO ATTEND THE 4TH BUSINESS IN THE PARLIAMENT CONFERENCE

NOTES OF THE DISCUSSION SESSIONS

As part of this year's Business in the Parliament Conference, seven discussion groups were held for delegates on the following themes:

1 - "Achieving sustainable economic growth in the life sciences and biotechnology industries"

2 - "Achieving sustainable economic growth in the energy industry"

3 - "Achieving sustainable economic growth in the financial industry"

4 - "Achieving sustainable economic growth in the tourism, food and drinks industries"

5 - "Achieving sustainable economic growth in the creative industries (including electronics markets, digital content and technologies)"

6 - "A discussion on the proposed Climate Change (Scotland) Bill"

7 - "Challenging management conventions in business and government, with practical presentations from two experts": Mr Stuart Ross of Ross International and Mr John Seddon of Vanguard and visiting professor at the LERC, Cardiff University

Each session was hosted by a minister or a member of the Parliament's Economy, Energy and Tourism Committee. Sessions 1 to 5 were chaired by a leading business person from the relevant industrial sector, with session 6 chaired by the chairman of the Scottish Environment Protection Agency. Notes of each session have been prepared by officials from the Scottish Government.

Disclaimer

The views expressed in these notes may not necessarily represent those of all the delegates that took part in each session, or the opinions of the Scottish Government or Scottish Parliament.

Discussion Session 1

Achieving sustainable economic growth in the life sciences and biotechnology industries

Introduction

The Cabinet Secretary for Education welcomed everyone to the meeting and thanked them for taking time to come along and to contribute. She commented on what a powerful, well-informed group had been gathered for this breakout session and was confident that they would come up with a constructive contribution. She noted that the life sciences strategy focused on 5 areas and that the first mentioned of these was people. As Cabinet Secretary for Education and Lifelong Learning, whose remit included skills, she welcomed the opportunity to discuss this and the other issues.

John Brown as Chairman also welcomed the group. He agreed with Fiona Hyslop that human capital was one of the crucial issues in life sciences and that the strength of the human and intellectual capital in the life sciences sector in Scotland was one of the key elements in conferring comparative advantage for the sector. He felt that the key issues were how to translate that intellectual and human capital into economic advantage and collaboration between the industry, universities and the NHS in order to realise Scotland's true potential. He suggested that the first question the group might consider is whether we are providing the right amount of skilled people with the right type of skills for the life sciences sector of today and tomorrow.

Main Issues Discussed

Attracting and Retaining the Right People

Contributors suggested that the strength of the science base in Scotland was a key factor in attracting people, companies and finance to life sciences in Scotland. It was as important to be able to attract people as it was to grow them in Scotland. If we did not attract the best scientists we would not produce the best science and would be unable to develop competitive spin-out companies. It was generally agreed that Edinburgh and Dundee Universities had been successful in attracting the right people. Some of those present felt that the relatively small scale of Scotland meant that we had a greater capacity for growth; we were already growing in the right direction, we simply needed to increase activity. Others commented that the quality of life that Scotland could afford was an added attraction.

Representatives from industry suggested that organisations and individuals benefited from placements within industry and that post-graduate places with automatic connections with industry would be a powerful incentive for people to work in Scotland.

The question of access to capital was raised. Companies could put together a powerful team of experienced and talented individuals but we needed to be able to hold onto them; finance was one element, but the critical mass which would enable people to move to another job if they lost their current one was an important factor. The previous mention of quality of life also influenced the willingness of people to come and work in Scotland who needed to bring their family with them. Most life scientists nowadays are internationally mobile and Scotland needs to capitalise on all its advantages to attract and retain them.

One company representative commented that they found it difficult to recruit enough graduates at all levels, not just those involved in cutting edge research, and that they needed graduates that were flexible enough to move from one part of a plant to another. Others commented that they had to resort to employing Polish scientists to fill a number of posts which they could not source from Scotland.

Another issue which concerned the HR/People Agenda was the number of people wanting to study science at school. Many of those present commented about the general lack of attractiveness in the way that science was taught in schools and the apparent lack of knowledge of career service staff about the opportunities available in a career in science. Many of those graduating with a science degree were moving into the city or the professions. Fiona Hyslop commented that it was essential to stimulate demand so that those pursuing a science career would know that they would be used at the right level. The Government was currently carrying out a study on skills utilisation. John Brown commented on the discrepancy between the skills that graduates leave university with and those that are actually required in the lab. One delegate commented that they had trained as a microbiologist before they became a chartered accountant and did so because the career prospects in science weren't attractive enough. They was now dismayed by the way that their children were being taught science and the careers information they were being given. Another attendee agreed and felt that this was being driven by the qualification system. The system needed to ensure that children had the skills to progress to the next level. They said that businesses would be involved in taking forward the curriculum for excellence. The curriculum needed to be flexible but relevant, and teachers themselves needed to be excited by what they were teaching and the prospects for those who continue to study science.

A comment was made that the idea of the Edinburgh Bioquarter was excellent and had attracted some key scientists to Scotland but the site had now sat empty for 2 years and progress was not being made quickly enough. We had to find out how to accelerate that progress. It was suggested that Government and industry needed to collaborate to work together to make learning packs for teachers and to train teachers to be confident enough to know how to use them. Fiona Hyslop said that there were opportunities in the curriculum for excellence to make the connections and that we should look at draft outcomes as a guide. One delegate thought that it might be useful to arrange opportunities for teachers to go into businesses over the summer to renew their excitement in what could be achieved in a career in science. John Brown agreed that industry needed to make more time to work with education.

Competition, R&D and Commercialisation

John also made the point that Scotland is not necessarily competing with other nations but with cities. In terms of size and market Scotland was on a par with Boston and Singapore. Estimates put Shanghai's population at between 15m and 20m, which meant that the size of Scotland was simply the margin of error in Shanghai. This meant that we needed connectivity within Scotland and inter-disciplinarily. The Scottish Funding Council's approach in encouraging pooling was useful but we needed other, commercially-focused collaborations at a Scottish national level. As an example, Wyeth came into Scotland because they saw it as a single resource prepared to collaborate. In this context transport infrastructure was key, including ease of travel internationally to Scotland's airports.

The issue was raised of entrepreneurial culture in which it was considered that the US was more advanced. They were more focused on completing the transition from the laboratory to a company making profits. Scotland did relatively well in terms of the number of academic start-ups and had a well structured method of commercialisation but there were weaknesses in, for example, the capital markets. We had created mechanisms to develop IP but there was a lack of entrepreneurs to understand, assimilate and exploit that IP. We needed to develop the talent to scale companies up. Procurement was also an issue: Government procurement in particular needed to be focused on a solution not an over-specified item. Fiona Hyslop agreed that procurement was a crucial element and that we needed to introduce some systems thinking on how to leverage the Government's spend on procurement and align it to the Government Economic Strategy. Comments were made that some companies could sell innovative devices, particularly in the medical devices sector, overseas but could not break into the NHS here in Scotland due to a silo mentality in budgeting and procurement.

Conclusion

John Brown thanked everyone for attending and for their useful and constructive contributions. Fiona Hyslop said that she would pursue the possibility of attending the next meeting of the Life Sciences Industry Advisory Group. For those who had been unable to ask specific questions, if they wished to submit these, Ministers would respond later.

Discussion Session 2

Achieving sustainable economic growth in the energy industry

Introduction

Mr Mather opened the session, referring to the energy sector as one of the key drivers of Scotland economic growth over the years. Looking to the future, there are areas that need to be addressed to keep the sector growing; we are looking to low carbon energy supplies, working on resolving planning issues, innovations such as the Beatrice project, corporate investment plans etc - what can the sector do to embrace the future?

The Chair for the session, Keith Mitchell of Clyde Blowers, welcomed everyone to the session, and spoke briefly about Clyde Blowers and their place in the energy industry (95% of their business is overseas; recently purchased Weir Pumps; supplier to energy sector not operator). He pointed out that the 3 main topics to be addressed were relevant to his company, and to the whole of the UK, not just Scotland.

Prior to the beginning of the discussion, the participants introduced themselves, and the company or organisation they represented.

Main Issues Discussed

Point 1 - what can be done to assist Scottish companies improve innovation and sustain their international credentials?

The group recognised the need to invest heavily in technology. Technical know how was coming back into the Scottish economy from rest of the world as result of our past investments. Scotland is seen as leading development, in the right direction, and as an innovative place to come. Succeeding at these technologies will in turn breed success in Scotland. Not just technological developers, but environmental consultants, and other industries feeding into or from the machines. However, companies need to understand that technology won't develop overnight, and investors especially need to stay with us.

The Chair asked if Scotland offers the right environment to succeed and develop? Was there sufficient support from government? Yes at this stage, but we need to ramp this up if we are to deliver. Very important to keep people on side and recognise strategic importance. Tackle impediments quickly. Encourage more links between development and industry. Links could be productive - we are low in terms of research and development in Scotland. Would collaborations with government, universities and commerce be possible?

We will require trained manpower on unprecedented scale since north sea oil explosion. We don't have the supplies of skilled workers now let alone in future. Cultural and educational change needed.

We need a strong domestic market. Foreign businesses want our skills, they will take our technology and use it. We can't progress because we can't get leases to do it. We have no access to the rights at this time.

Administrative mind changing a problem. For example, MoD and their radar problems. 90km limit for siting turbines near radar. MoD won't back down, claiming national security problem. New radar being fitted now in Norfolk supposed to deal with it. But old radar is still there as infill, and that will still be a problem.

Is the time right to rethink fundamentals in renewable technologies? Development needs funding - research to commercialisation route. SMEs can't fund 50% of development programmes. Turn it round and say state is responsible for nurturing new technology. State can offer contracts to develop - no delivery, means no money. Successful devices will then get money and make money. We can't invent everything - can have partnerships with other suppliers/build on their technologies. But again someone has to pay and the companies can't always do that.

Implementation of marine energy not necessarily going to happen before 2020 deadline, so it would be unwise to put all our eggs in that basket - will deliver some but not all. Pressure to deliver is huge on unproven technologies like offshore. Business community needs to work more closely on man management, work with home owners and their energy needs, fuel poor identification, innovative partnerships to deliver actions.

One great concern - was the UK Energy Bill. Can't have banded ROCs and research grants.

Point 2 - What can Scotland, as a country, do to enhance the awareness and interest of people in today's hugely exciting energy industries?

Problems - too many youngsters are going to university instead of tech colleges. There are no apprenticeship organisations. Awareness of opportunities of industries is not available to the people giving careers advice. Science/engineering rundown in schools. Need to re-engage with schools. Can Education do it? Have they the knowledge themselves to re-engage? SSE identified need for engineers. They are recruiting from all over Europe - can't get them in Scotland - kids tolerate education system rather than enjoy it. Company does whatever it can. They have a scheme where they fund 15 students from the area - offer them a bursary and employ them in summer; offer them employment for 2 years after they qualify.

Workforce development is also important. Employers must let staff develop the changing skills required by business. Current employees can be best advocates for future recruits. The engagement of private sector in education is critical. Their role needs to go across the wider public as well, addressing public perceptions of industry.

Industry has an image problem - working in oil industry had a poor reputation with public. Perception wind is a problem rather than a possible solution to certain problems. Need 'industry champions' across key industry sectors. Decide who is the best person in the world to represent a sector, and get them to come to Scotland - like building a football team. Might be costly, but will be worth it in the long run. Manufacturing sector might also have to revisit its image and make it more positive. Press print pictures of big installations/buildings, but with no people in them - get them to print pictures of the people who work there!!

Point 3 - what can be done to help our energy companies prepare for a possible upheaval or downturn in their business environment?

Invest in R&D when you are making money! When the lean time comes you will have the people etc to help you get through that period. Don't over-produce when times are good - case for state intervention. Small companies would benefit from that approach. Technology innovators ARE small.

Where is the energy industry going - it will be very different in 20 years. We need to think about what the company structures/business opportunities will be. Have to think forward, not back to what industry was.

International oil agency forecasts 14m barrel a day deficit in store - this will affect everything. It would be prudent to do strategic planning around that scenario - how to survive it, and what can replaced the fossil fuels? Example - switch from decarbonising to defossilising our energy economy - Japan, Iceland, Scandinavia - moving from fossil-based to hydrogen-based fuels already.

Identify barriers obstructing transformation of energy industry. Companies will have to adapt and change whether they want to or not. Whole energy economy will have to adapt to cope. Key issue for business is certainty/clarity in government policy. Stagnation in industry. Need to stimulate significant leaps - need government help to overcome barriers.

Change behaviours rather than lower costs? People need to value energy more. Keeping costs artificially low will stifle innovation and won't survive downturns.

Chair - does foreign ownership of our companies put us at risk in the face of a downturn and if companies start to divest themselves of assets will they divest from us first?

Need to be realistic in ambitions - the challenge for foreign owned companies in Scotland is to look at productivity levels and accept we don't compete at the moment. Makes it difficult for them to keep Scottish sites. Competitiveness is vital

Need indigenous market to learn our trade and then export our knowledge and skills. Keep them here, maintain them and deploy them here. Leadership - inspiring people - other people inspire people.

Issue re international competition and domestic markets providing reassurance in global downturns. There is a shortfall in supply chain for on offshore wind. Can't deliver any major new orders by 2012. where there's an opportunity we should support our indigenous industry in Scotland.

We are low in the pecking order - how can we deliver our own requirements via current supply chains, let alone go abroad?

Conclusion

The Chair thanked everyone for their interesting and informative input. Closing remarks from Mr Mather echoed his sentiments.

Discussion Session 3

Achieving sustainable economic growth in the financial industry

Introduction

John Swinney welcomed everyone to the breakout session, commenting that it was great to see such a large gathering to discuss this theme. He advised that Owen Kelly, SFE Chief Executive, would chair this session, lead the discussion and feed back in plenary later.

Mr Swinney then referred to the presentations from this morning's plenary session. One powerful theme and central to the work of the Scottish Government is the need to get Scotland focused - get us coherent. One of the rich pieces of inheritance from the previous administration was the dialogue undertaken between government, the industry and other key stakeholders within the Financial Services Advisory Board (FiSAB). This forum is basically a 6-monthly meeting enabling issues to be "kicked around" - crucially the focus is to find out what Government can do to assist, or oil the wheels in meeting challenges of importance to industry. The thinking behind this model now underpins other work and Mr Swinney cited the work which Jim Mather MSP, Minister for Enterprise, Energy and Tourism, has been undertaking with different sectors in Scotland to identify obstacles and seek common ground. One big question at FiSAB and coming out of work started by the previous administration has been the importance of tackling skills availability and this remains a big issue. Mr Swinney reiterated the Scottish Government's view that the financial services industry is absolutely critical to the performance and prosperity of the Scottish economy and he felt that today offered an opportunity for exciting debate.

Owen Kelly echoed Mr Swinney's welcome to delegates and explained that today's discussion would be captured in writing and delegates would be informed when the full report of the Business in Parliament Conference, including breakout sessions, was available on the Scottish Parliament website.

Main Issues Discussed

Owen welcomed the group's spread of representation from not only the "big players" in the industry but also from those many colleagues from the customer interface area of the sector. He explained that everyone had the briefing paper for today's breakout session which included a list of questions to be addressed. However, as we had all heard some very insightful contributions from the speakers at the plenary session, Owen felt that it would be helpful to spend a few moments reflecting on whether we had the right topics for discussion. He suggested, and those present agreed, that the list ought to be prioritised:

1 - Whether FiSAB is looking at right issues, and if the answer is yes - lead to

2 - Skills

3 - Globalisation - is it a threat, an opportunity or both?

1 - Is FiSAB looking at the right issues?

Owen explained that the Strategy for the Financial Services industry in Scotland, which is overseen by FiSAB, had been running for around 3 years. It is based on 3 main pillars - People; Profile and Infrastructure. The following issues were then discussed:

· The current uncertainty in financial markets and the need to look at the complexity of financial services products. Reminded of the maxim "keep it simple stupid". There is a view that the industry has become too clever and sacrificed trust. People are now nervous about financial services institutions.

· Some comment that "Customer" doesn't seem to be covered - in these uncertain times both the industry and the government have a responsibility to inform and educate the consumer. We need to understand peoples' financial needs which are changing all the time.

At this point the Chair turned to politicians for a view, asking - are people losing faith in financial services companies?

· Iain Gray MSP (Labour, East Lothian) felt that there is certainly a feeling among people that they don't understand a lot of the financial products e.g. pensions which are quite complex - this does make people uneasy about financial institutions. The events of recent months had played into that - people do understand that Northern Rock has had difficulties but not what the difficulties were. On the other hand, there had been very little panic over Northern Rock - the first "run" on a bank (or at least people queuing to get their money) in over one hundred years.

· John Swinney agreed with Ian Gray - he observed that there is a sense that Northern Rock affected Northern Rock investors but that people who had not been personally affected did not appear to be overly worried and this seemed to suggest an element of confidence in the industry. However, in terms of the role played by politicians, Mr Swinney raised the issue of regulation. This was not a partisan view - he himself had voted on a number of occasions for a raft of regulation and he was sure that all politicians who did so were genuinely motivated to create a mood of public confidence in financial services organisations and products. What we need to consider is whether elaborate regulations which put burdens on financial services companies, and in many respects drives complexity, fulfil their purpose - which must be to guarantee consumer confidence. He acknowledged that this is very difficult to achieve within the regulatory framework.

· Iain Gray then raised the issue of innovation. When we talk about innovation we often mistakenly restrict ourselves to university spinouts and science and technology projects Financial services in Scotland have been driven by innovation since we invented the chequebook and the overdraft and in recent times with, for example, the invention of the offset mortgage. Do we need to ask if this is a contradiction - we have already heard an argument about too many products on offer making things too complex for consumers. These Innovative products like the offset mortgage have been designed to meet customers' needs - although some others have arguably been designed to serve the industry, leading some to wonder if there is some sense that the customer hasn't always come first.

Further discussion then took place around the table - agreement that the difference is in transparency - the offset mortgage had been designed for the customer's needs and to be transparent.

· Some people will be directly affected but that there is a time delay - for example, those with investments in the buy to let market with fixed term loans will not have experienced any problems yet in terms of liquidity, but when their fixed term expires they may do so. Of course, the market may have moved on by that time.

· From a banking/investment perspective - within a Scottish context - the current reporting season has shown robust profits - Scotland should be relatively insulated from the recent difficulties as , in the main, there has been little involvement here in the sub prime business.

· We need to flip around to where are the opportunities globally - lending is contracting in the US and Europe, but there has been a massive liquidity boost in the Middle East with a 10 year potential. London is embracing this with support from the Chancellor. Scotland needs to embrace and challenge this and capture it in our banking, fund management and insurance sectors.

The Chair then drew this to a close on this more positive note by asking whether business has any wider thinking going on at company level on the wider issue of loss of faith in the industry.

· Agreed there is uncertainty, not fear but worry. In the recent difficulties at Northern Rock, industry allowed the press to carry the story but with a good customer contact strategy many people's fears could easily have been allayed e.g. those with less that £30,000 invested were insured. Had this message gone out properly the public reaction would have been much different.

· Also agreed we can't affect global trends but can present the customer facing bit in a simplified way - it is complex but we can use innovation to enhance our reputation as a good country to do business in.

2 - Skills

The Chair then moved on to our second issue for discussion. He made reference to the First Minster's speech this morning and his references to human capital as well as Professor John Kay's mention of Scotland's declining population. Skills is being looked at by FiSAB under the People pillar - views were invited from delegates and the following issues were discussed:

· Financial Service is often not the first choice of career for young people leaving education and we need to do a lot more to educate people about the diversity of careers available, that a wide range of backgrounds are required and that a sustainable career is now available - which may not have been true a few years ago, but the growth in the sector has improved this. We also need to do some work on raising aspirations among young people.

· We need skilled consumers in this complex area - people need to feel confident going into a bank - levels of financial literacy are important - vital to the sustainability of the industry. Chair pointed out the work being done in FiSAB on this issue and through Otto Thoresen in relation to generic financial advice.

What issues are facing employers which the Scottish Government can help with?

· Most top talent in Scotland graduate and move to England to work - probably remain there for 10-15 years before moving back.

· Skills is the heart of sustaining a successful sector in Scotland and a key pillar in the Strategy for the Financial Services Industry in Scotland- the issue in Scotland and elsewhere is cohesion - we need to ensure that all agencies are joined up. We need to bring people back to Scotland and to ensure that foreign nationals (who bring a variety of skills with them) are assimilated into this country. Companies also need to look at non traditional parts of the community e.g. early retirees; women returners and ensure they have flexible practices which will encourage people to come and work in the industry.

· Scotland is full of conundrums in relation to skills. It is the only nation/region of the UK with more graduates than people with no skills. The main issue about skills is utilisation - huge number working in jobs where skills are being under or wrongly used. The focus to date on the production of skilled people is OK but investment here is not producing a successful economy as the skills are not being employed to best use.

· There are 6 priority sectors in Scotland - 5 are prominent in HIE but financial services still small in that region. Westminster city council has 350 people in Dingwall providing exceptional customer service to people in Westminster City council area. The council is about to move its internal financial services the highlands (8 languages in the contract). BT is at the cutting edge of thinking o e.g. "home shoring" where technology makes it possible to enable people to provide complex services from home - about to launch something in Caithness.

· Universities measure performance as the number of graduates in employment after leaving their course should be measuring number in "relevant" employment. Large numbers of graduates in contact centres - they have great skills but are there in a transient capacity - we need to ensure that people are using their skills appropriately and this needs proper dialogue between education sector and industry

The discussion continued with an anecdote about a delegate's discussion with a policy official about why we continue to teach French in our schools rather than Mandarin and Spanish etc - the answer was "what would we do with all of the French teachers". This led to a wide ranging discussion, led by Mr Swinney, on the need for alignment with Scottish public policy. Scotland is spending colossal amounts of public money on education and skills - but it is not giving us the punch that it should.

· Pauline McNeill MSP (Labour, Glasgow Kelvin) agreed that alignment is a real challenge. Three universities in Glasgow, all very different and she is keen that they don't merge because of their distinct roles. However, we need more control of planning with the Higher Education Sector - for example, why is Glasgow Caledonian now running a law school - no need for that because of other universities offering this. HE Sector wants more freedom on what courses they offer - we need a control mechanism through the funding council so that we can achieve alignment with industry sectors.

· John Swinney explained that the purpose of Government Economic Strategy is to increase sustainable economic growth and all of those organisations who spend public money need to reflect on this in their planning - just as important is the issue of "filtering down" we need to see how we can motivate and corral people to follow the Strategy.

The final point in this discussion related to the issue of personal choice. Agree that we need to get the HE sector to respond to the alignment argument but must realise that people choose to study the subjects they want. If we want people to pursue specific skills we need to incentivise them in some way, for example as happened in England and the USA with teachers. We can drive the policy of alignment but need to encourage individual choice which matches the policy direction.

3 - Globalisation

The Chair then moved the discussion on to globalisation - does it provide an opportunity or are there downsides? The discussion began by looking at promoting Scotland:

· Scotland has been the best performing region in Europe in attracting foreign direct investment.

· We have the foundations of a hugely successful sector and one where we do have a significant competitive advantage. We sell ourselves on a strong legacy and risk minimisation. We are not the cheapest location in the world but we are cost competitive.

· The Chair asked whether it is true that it seemed that the perceived threat of globalisation is one that we are relaxed about.

· Scottish Enterprise is funding some research by Professor Phil Taylor at Strathclyde University - looking not just at the number of jobs in the customer contact area lost to offshoring but at the types of job. There is a huge increase in numbers of people working in contact centres yet a few years ago people said that Scotland would soon have no contact centre jobs. Now - IBM is managing calls from all over the world, Dell is doing the same - and the language capability in Scotland is substantial. This sector is probably growing - not in double digit terms but not showing signs of decline.

· We need to look to globalisation as an opportunity - people have concerns about fraud, ID theft and we have a reputation as a "trusted adviser" - we need to have the ambition to see Scotland with "Trusted Adviser" status.

Conclusion

The session concluded with recognition that all of the issues discussed had a common underlying purpose - how we make Scotland the best it can be. The main challenge would be ensuring that government works with industry to ensure this is achieved- and today had been extremely helpful.

Discussion Session 4

Achieving sustainable economic growth in the tourism, food and drinks industries

Introduction

Tavish Scott welcomed the delegates to the session and encouraged everyone to join the discussion.

Allan Burns opened the discussions by noting the strong links between the Tourism and the Food and Drinks industries, noting that both have growth ambitions and significant potential. He asked the group to consider what opportunities there are.

Main issues discussed

Positive attitudes to growth targets

The discussion started with a debate about the importance of having a positive attitude and increasing our capacity to look for opportunities for success rather than just seeking and complaining about barriers. It was generally agreed that the growth ambitions for both food/drink and tourism were achievable although there are certainly some challenges around tourism.

Industry Leadership

It was suggested that it is easy in discussions such as these to focus on the barriers that businesses feel inhibit any development. There is a need also to demonstrate strength in leadership by the main industry players in tourism and food and drink, creating a strongly positive attitude. Government and all the public sector has a vital supporting role- setting the playing field in which the industry will work. Some also suggested that tourism was too important to be left only to the industry to lead, and that perhaps there is a need to be more prescriptive to ensure that quality tourism products were on offer.

It was noted that industry leadership is needed at all levels- including locally. There is an important role for community groups.

Need for delivery

There was a view that on tourism, we have developed an agreed strategy, we have reasonable leadership within the industry; but what we need to concentrate on is delivery. It was suggested that we have reached a stage where we should impose a need for quality of our tourism and food products.

Infrastructure requirements

Several delegates raised the need for improved infrastructure within Scotland to meet tourists' demands for easy and sustainable access. Improvements to road and rail and more direct flights to Scotland were called for. It was noted that without direct flights, Scotland may have to make do with tourists only visiting Scotland at the tail of their visits to the UK- often having arrived in London.

Quality products

There was discussion about how there has been significant improvement in the quality of "top-end" tourism and food and drink products ("premiumisation") but that this was consistent across more general levels of product. It was noted that tourism relies very much on SMEs.

Planning regime

A number of delegates mentioned the slowness of the planning process and how this can delay and discourage development and investment.

Tourism skills

The Minister for Schools and Skills emphasised the training needs of tourism businesses. She highlighted how the Skills Strategy can help to identify what is needed and how this can be delivered. Others noted that it is not always easy to engage with tourism businesses to understand exactly what skills gaps exist- especially in SMEs. As a practical example of how this can be overcome; reference was made to a local initiative in Bathgate where the business community had commissioned the provision of an SVQ in customer services and that many local businesses were making use of this for their staff.

Scotland's heritage

The value of Scotland's tourism products in its history, heritage, food, beauty and landscape was highlighted. It was suggested that there may be a need to focus on some of these in certain areas in order to decide where priorities should lie in further developing these.

Scope for increasing market penetration

It was agreed that overall, and particularly for food, there is great potential to increase the penetration in markets south of the border and also that businesses should be encouraged to cross-sell by providing information about other products

Discussion Session 5

Achieving sustainable economic growth in the creative industries (including electronics markets, digital content and technologies)

Introduction

Mr Crawford welcomed the delegates to the session and emphasised the importance of this event in bringing together business leaders, industry stakeholders and policy makers to exchange views and work together in moving the sector forward. In introducing the discussion he highlighted the diverse nature of the Creative Industries which encapsulated many disciplines and technologies. Digital Media and Creative Industries was recognised as a significant contributor to the Scottish Economy - employing an estimated 100,000 people and accounting for around £2.8m GVA. It was also an area in which Scotland had clear potential to lead the world, as demonstrated by the significant investment our infrastructure capability at Glasgow's Pacific Quay. The BBC has invested £180m in Europe's first all digital, tapeless environment - transforming the delivery of digital content. The entire Pacific Quay development had only been made possible through some far-sighted intervention by a number of partners including Scottish Enterprise and Glasgow City Council. Government was also assisting the development of many enabling technologies through programmes such as SMART:SCOTLAND but it was clear that much needed to be done. Mr Crawford thanked David Stewart, CEO of Critical Blue Ltd, for facilitating the morning's discussions before passing over to him.

Main Issues Discussed

What is the role of industry and Government in moving the sector forward?

A key theme emerged on the importance of industry articulating the range of activities encompassed under creative industries - not an easy task given the breadth and diversity of the sector. This would involve greater partnership working within the business community to articulate this message. It was clear that relatively few business people had put themselves forward to attend this session and there was a feeling that unless the width and depth of companies in the Creative Industries sector were prepared to get involved, it would be difficult to make any significant progress. There were positive signs of the Scottish Government's willingness to engage with industry and this represented a real opportunity to develop a strategy similar to those prevalent in other sectors such as Financial Services and Life Sciences.

Government had a continuing role in reducing the levels of bureaucracy faced by business and as with previous conferences, procurement emerged as key area for increased Government focus. There was a need to facilitate easier access to public sector work, particularly amongst the SME community who were finding this door firmly closed.

In addition, other suggestions for potential Government intervention emerged including: targeted support for intellectual property protection, using a 40 hour week as the basis for tax collection which would drive up business competitiveness and consideration of an incentive scheme allowing business to receive a return from the exchequer (perhaps as a pension credit) as a premium related to VAT collection. Some of these were recognised as reserved matters.

Shaping the future of the Creative Industries

It was clear that there was enormous global economic opportunities within Creative Industries. Diverse examples were highlighted, including an existing Scottish company already operating with global organisations in the area of marketing and advertising video. There was also huge opportunities in the field of on-line entertainment with global markets estimated between £29 and £44 billion - the question is how much of this market does Scotland aspire to attain?

The group identified the need to raise Scotland's game and address the key issues preventing rapid growth through a co-ordinated approach involving industry and Government. Some of these were identified - the lack of headquartered large companies in Scotland, too few micro companies not developing into large SMEs and the importance of improving skills in the work-place by perhaps looking at other successful programmes such as Train to Gain which currently operates in England.

There were inherent difficulties in taking forward a co-ordinated action plan for the entire Creative Industries in Scotland - it was considered too large and more or less impossible to define. In view of these factors, the group discussed how future actions could be best progressed. Digital Media and Information and Communications Technologies (ICT) emerged as two key areas for Scotland. There were activities underway within both - the recently formed ICT Forum had brought together important private and public sector organisations to examine how ICT could play a more significant role in the development of the Scottish economy and Scottish Enterprise was embarking on the development of and Industry led strategy for Digital Media. These were important work-streams offering potential for co-ordination and the development of a broader and more powerful action plan. The group stressed the need for industry to become more engaged in this process and all delegates agreed to help stimulate interest amongst their industry contacts.

Agreed Actions

Action Point: All group members to engage with industry contacts and encourage participation in development of Action Plan.

In highlighting the importance of this area to the Scottish Economy, Mr Crawford advised that Parliament time would be made available to debate a proposed Action Plan - prior to summer recess if sufficient progress could be made. This provided a welcome focus to the ongoing work and there was a clear action for the ICT Forum and Digital Media Strategy group to work together to deliver this Action Plan.

Action Point: ICT Forum and Digital Media Strategy group to work together to deliver coordinated Action Plan.

In moving forward the group emphasised a consensus view that it was important not only to set long term strategies, but also deliver results over the short term - this very much echoed one of the main themes covered by Ian Marchant in his earlier presentation.

Conclusion

Mr Crawford thanked everyone present for their participation in the event and input during the lively breakout session. He also thanked David Stewart for facilitating the discussion group in such an effective and professional manner.

Discussion Session 6

A discussion on the proposed Climate Change (Scotland) Bill

Introduction

Stewart Stevenson MSP welcomed the delegates and the opportunity to hear the views of business on both the Scottish Climate Change Bill consultation and wider Scottish Government action on climate change.

David Sigsworth, opened the discussion by reminding the group that the Bill consultation is specifically about setting a framework to deliver the Government's commitment to reduce emissions by 80% by 2050. It does not include any of the measures or identify long-term policies needed to reduce emissions - while these aspects are undoubtedly of interest to the business community, this is not the purpose of this Bill. He highlighted that some policy proposals, which would require legislation, will be consulted on separately. A key aspect of the Bill consultation is the nature of the target, how it is measured, how benchmarks are set and what is needed to ensure continuous progress.

Main Issues Discussed

Opportunities to be gained by Scotland's early adoption and ambitious action

The group welcomed action to help business invest in the future renewables market and it was acknowledged that there were potential business opportunities from climate change related activities. Good innovation in this area can offer business a competitive edge. The example was quoted of a Scottish company which had developed an energy efficient product that had helped to boost profits significantly and secured hundreds of Scottish jobs.

It was noted that business must remain aware of global action on climate change. Some group members had already looked abroad to find practical examples they could use in their own businesses - Sweden's work on ethanol fuels was cited as one example.

While supportive of the Scottish Government's ambitions - some questioned the ability of Scotland to deliver on climate change in global terms and there was a note of caution that these ambitions should not affect a business' ability to be competitive.

Emission budget periods

The proposed bill suggests a framework that needs monitoring and budgeting to see it is delivered. There was no consensus on what budget periods should be adopted. It was noted, however, that business cycle information should inform the setting of these budget periods. It was also acknowledged that as well as the `Scottish' business cycle many companies operating in Scotland need to be aligned with global, EU and UK cycles, and the Bill must do the same.

Given the long term approach to climate change it was suggested that the Committee on Climate Change - which will offer regular scientific and economic advice to governments - might offer the most stable, long-lived institution around which to tie the emission budget period. Acknowledging that some infrastructure needs require decades in terms of budget setting - it was noted that once an understandable framework has been developed - it could be periodically reviewed - in a consistently understood way - that would allow targets to be realigned. A key challenge for the Bill is to ensure Scotland's action on climate change is in line with EU and UK action and timescales.

Motivations and Approaches to Risk

Motivation for business engagement in climate change action was discussed. Many in the group acknowledged the growing pressures/expectations from both employees and customers. Government pressures on the public /private sector to take action was often matched by pressure from elsewhere. Moves by some supermarkets to ban the use of air transport from their supply chain was one example of an external factors that can affect businesses. The quicker business starts to look for savings the more they will save and, the more prepared they will be for the challenges imposed by others.

Mr Stevenson asked if tax rebates/reductions for those adopting energy efficient measures would be welcomed. There was a comment that any reference by government to tax was always looked upon with suspicion! Participants felt most businesses support the need for energy efficiencies and would support legislation if it was seen as helpful but remained uncertain about link to tax support.

The different approach to risk by the public and private sector was discussed.

Understanding the processes required of business and the cost of carbon will take time to develop. If Scotland wants to be ahead of the game there are inherent risks and there needs to be an assessment of these risks in terms both of costs and the long term return.

There was support for more partnership between business and government - sharing both the responsibilities and the risks.

Demonstrating how Scotland is progressing towards the Bill's long term targets was considered vital to give communities and businesses the ability to maintain and drive support for climate change actions.

Vehicles to deliver the Bill's aims and objectives

The Bill is seeking to establish a framework it does not seek to identify the vehicles that will deliver its objectives. However the group did discuss what these might and should be. Acknowledging the range of activities that can be adopted in support of climate change, discussion around energy demand, energy efficiency and renewables dominated. A need for a common sense approach to the implementation of any legislation was noted.

The current focus of the building and construction industry to improve the sustainability, insulation and energy efficiency of new buildings was seen at odds with the size of the potential wins from energy efficiency in existing build stock. Support to enable businesses to bring their buildings up to an agreed energy efficient /sustainable standard was considered helpful and the opportunity for government to set an example with action on their own buildings was encouraged.

It was noted that the EU Emissions Trading Scheme (ETS) and the Carbon Reduction Commitment (CRC) should provide the drive and challenge needed to get many business and industries actively seek energy reductions.

Readiness for Action

The need for action now, as mentioned in Ian Marchant's opening presentation - while supported by many in the group - led to discussion around some inherent and long standing issues about the ability of Scotland's infrastructure to rise to these new climate change challenges. The need for a `joined up approach' from government, its agencies, and business was recognised, There was a call for faster decision making and greater predictability in planning decisions. Comments also highlighted the need for business to be confident that actions implemented now will not simply be abandoned or countered by subsequent government administrations.

Some noted that climate change had already motivated them to reflect on the `lifestyle' of their companies - allowing them to review the sustainability of their current approach. The incentive was real cost savings but this often required them to go beyond the obvious `trendy' responses e.g. for transport bio-fuels are often presented as `the' solution. Today for a Scotland wide fleet operation it is not a practical option but, retraining drivers to be more fuel efficient is - and can deliver instant results.

A key feature of this discussion was the sense of pragmatism. The group got down to saying that every firm, community and organisation that can make a contribution ought to think now of one thing that could make a difference tomorrow and next year, and that they ought to look for one relationship in which they could start to share their current expertise with others.

Conclusion

The following key points were identified by the Facilitator - David Sigsworth and formed the basis for his feed back to the plenary discussion:

· The ambition of the Climate Change Bill (80% emissions reductions by 2050) was seen by the group as a massive challenge to Scotland, but it was recognised that in global terms this contribution would be small. Work in Scotland must be matched with international effort to pass on our skills and show leadership in the world arena

· The Bill's emission budget and monitoring periods should be integrated to the business cycle of those who are expected to invest in and plan to deliver the legislation - principally businesses and local authorities - but must also align with EU and UK action and timescales.

· Climate change is not and should not be treated as a single issue - it needs to be considered in the round as part of all decisions and planning.

· While new technologies will play a part in delivering our climate change ambitions it will be critical to ensure all existing measures are employed and incentivised. Energy efficiency was seen as a key driver - at all levels not just energy sector but manufacturing industries and heating communities. Need to review the incentives offered and remove the blocks to adopting energy efficiencies

· Strong science support to show how Scotland is progressing towards our target will be important to give coherence, and support business and communities in their task of driving continued and committed support to meet the Bill's objectives.

· The Group supported the practical approach adopted by Ian Marchant and the Climate Change Business Delivery Group - acting now to deliver. This is not a task that can be put off to future years.

Discussion Session 7

Challenging management conventions in business and government

Introduction: David Whitton MSP

David Whitton welcomed Stuart Ross to the session. As Managing Director and Principal Resultant of Ross International, Stuart has many years of experience in driving improvement in both the private and public sectors. Known for his passion and enthusiasm Stuart has been a pioneer of the LEAN approach which will be the main focus of his session today.

Stuart Ross - Main Issues Discussed

Stuart Ross covered the role of his company in driving improvement in public and private sector businesses using the LEAN approach.

LEAN is essentially about people at all levels of the business systematically and continuously identifying and eliminating things that waste time, cause blockages to flow and generally add no value to the customer. Stuart stressed that the key to success of this approach is the commitment of top level management, but more importantly it is about winning hearts and minds of people who work in the business.

Stuart outlined the stages involved in a Kaizen Blitz (change for the better) or Rapid Improvement Event (RIE) week. The main purpose of the company's involvement is to help organisations to train their own facilitators and become self sufficient in driving forward improvement.

The presentation (attached) sets out the context to LEAN and highlights specific examples of its operation in multiple sectors in Scotland.

Questions / Discussion:

Does the success of the approach work better after repeated events?

Yes. More importantly people need to see it working in their own environment rather than in theory.

The approach is predicated on a common goal for the 'customer' - what if this is contested, particularly in the public sector where there may be competing goals and trade-off is required?

LEAN is adept at getting multi-functional teams with different interests on to a common goal. It helps to focus on what matters rather than petty rivalries which tend to disappear.

What was the involvement of Trade Unions in the examples mentioned?

Depends on the organisation. When LEAN is combined with other major change such as downsizing it can be very sensitive. The approach however is predicated on giving responsibility and influence to all levels of staff, particularly to those staff who are closest to what the customer wants. It should not be threatening for staff, on the contrary it offers great learning experience.

How does the approach help to determine the bigger picture, for example the 'what' we are trying to achieve for the people of Scotland rather than the roles of individual organisations?

The approach includes 'value stream mapping' allowing us to view the respective contribution of various parts of the organisation, including the competing views.

How is the approach replicated in very small organisations?

The principles remain the same. 22 is the smallest organisation that Ross International have used the LEAN technique with but have worked with small Departments of around 9 people within larger organisations.

Can see the focus on the customer but what about the importance of communication and relationship building?

This is an important aspect of the approach and time should be used in understanding their needs and how the business can best respond

The importance of getting buy-in from middle management?

It is vital that middle management are involved in process from outset - they are often feeling the most exposed in terms of being 'squeezed'. The process brings together top-down with bottom-up.

What makes this different from 'time in motion' or 'work study' approaches?

The LEAN approach and the Rapid Improvement Events are not 'stop-watch' environments. The team themselves work together to drive out waste which is often very obvious.

Introduction: Adam Ingram, Minister for Children and Early Years

Adam Ingram welcomed John Seddon. John has become prominent in his challenge to conventional management practices and his thinking has been set out in a range of publications, including "Freedom from Command and control - a better way to make the work work", "I want you to cheat: the unreasonable guide to service and quality in organisations", "The case against ISO900" and his soon to be published "Systems thinking and the public sector".

Improvement and efficiency in both the operation of the public and private sectors is key to the Scottish Government's overarching purpose of sustainable economic growth.

Mr Seddon has also met with Ministers in the last few months and has been complimentary about our leaner and more focused approach to Government and on the direction of travel on certain issues not least our determination to move to an approach where the premium is on achieving outcomes not on the swathe of monitoring and processes that distract us from our objective of sustainable economic growth.

We have a real opportunity as a nation to be bold and adventurous in what we do. We want to be open to fresh thinking and new ideas and John will want to challenge us all further on our fundamental approaches to business.

John Seddon - Main Issues Discussed

John introduced himself as an occupational psychologist and management thinker credited with translating the Toyota Production System (TPS) for service organisations.

John highlighted the influence of W. Edwards Deming, whom John credits with introducing him to the importance of understanding and managing organisations as systems and Taiichi Ohno who showed the practicality and power of doing so in manufacturing. Full presentation attached.

The main issues John stressed during the presentation were:

· Change the system and the culture of a business or organisation changes.

· Much of the demand within an organisation is not 'work' but failure demand.

· Use real data from the work - organisations need to understand the predictability of demand.

· There is a role for managers in an organisation - but this is to complement 'the work'.

· The cost of any business is in the 'flow' - we rarely measure this within organisations. Stressed 'economies of flow' not 'economies of scale'.

· Standardisation is a bad idea - we should be designing against the demand for the service or product

· We must embrace the need for variety in service organisations. Must adapt to variety of customer needs.

· People should be in charge of their own learning, this will increase their ability to serve the customer. Serving the customer and improving the job go hand in hand.

· If we set targets, then people will use ingenuity to find ways to meet targets. Often at expense of delivering what is really required by the customer. Targets can be destructive.

· We must strive beyond 'best practice' - business should be continually improving and adapting to the needs of the customer.

· Critical of 'call centre' type approaches - 'one stop shops' generally means the business cannot do anymore with it!

· System design - Plan/ Do/Check.

· A plan should not be at the core of the business. Knowledge of what the customer wants and knowledge of how the business is working is paramount.

· The specification and inspection regime is wasteful the paradox being that this is meant to improve public sector performance. There are five main types of regulation (writing specifications; inspections for compliance; preparing for inspection; the specifications being wrong; impact of inspection on morale)

John concluded by stressing that waste is nearly always man made and anything that does not create value in an organisation is waste. He urged us to think counter-intuitively against what we have built in our businesses and organisations - a 'command and control' structure. We have started well in Scotland - for example our new more trusting relationship with local government through a concordat - but have a great opportunity in Scotland to challenge the conventional target culture being driven forward by UK Government.

Questions/ Discussion:

What about capability measures (rather than target setting)?

Capability measurement should be the cornerstone of public sector improvement. We should always look at purpose from the customer's point of view. The end to end process is important but we need good quality time-series data so we can look beyond the 'average' performance. Waste needs to be designed out of processes not just in the business concerned but the waste that is knocked on to other services e.g. legal system.

Targets tend to focus people on the wrong things, they focus peoples' ingenuity on survival rather than improvement. Capability measures encourage peoples' ingenuity to be focused on how the work works. Targets have little value in understanding and improving performance; capability measures are of great value in understanding and improving the work.

How challenging is it for people to buy into the philosophy?

Accept that such a counter-intuitive view is challenging to grasp. And a 'manager never admits he/she cannot manage"! But learning by doing is the best way to demonstrate success of the approach - examples of housing benefit improvement in London Boroughs.

Are local authorities going to take on the philisophy?

They have to be willing and open-minded participants. Be wrong to force the views on them. Certainly open to any approaches.

How does the fee structure of regulatory bodies (e.g. in Care ; or in relation to environment) affect performance of scrutiny bodies?

Better regulation is an oxymoron. Care is a sector which is 40% less productive than it should be. At least you appear to have a more streamlined set up in Scotland - care establishments in England are dogged by regular, uncoordinated visits from different bodies

How do politicians defend themselves against accusation of failing to improve?

Clearly a very difficult issue, not least in that the public perception can be that targets, monitoring audit and inspection provide a degree of 'protection' from failing services. But a good start has been made in Scotland with a more trusting relationship with local government through a concordat for example. Ministers need further exposure to learning. Measures of progress that represent people's views are what really matters.

The session concluded by a discussion on "Getting it Right for Every Child" and Changing Lives (developing the capacity of social work / social care) and whether a universal approach as distinct from a much more targeted approach was most effective. John urged not to treat all children the same - the key was to have knowledge of what is going on out there and tailor services accordingly. Advice would be to avoid standardisation.

TRANSCRIPT

Friday 22 February 2008

Col.

Opportunity Challenge-Achieving Sustainable Economic Growth....................................................... 1

The First Minister (Alex Salmond)........................................................................................................... 4

Tavish Scott (Shetland) (LD)................................................................................................................. 11

Mr Ian Marchant (Scottish and Southern Energy).................................................................................... 16

Susan Rice (Lloyds TSB Scotland)....................................................................................................... 20

Professor John Kay (London School of Economics and Council of Economic Advisers).............................. 26

Feedback and Open Forum.................................................................................................................. 30

Cabinet Secretary for Finance and Sustainable Development (John Swinney)............................................ 46

Closing Remarks................................................................................................................................. 51

Business in the Parliament

Friday 22 February 2008

[The Presiding Officer opened the meeting at 09:00]

Opportunity Challenge-Achieving Sustainable Economic Growth

The Presiding Officer (Alex Fergusson): Good morning. I am pleased to see that you have all survived last night's dinner extremely well. You are all looking very fit on it, and it is nice to see you here this morning.

I am privileged and genuinely delighted to chair the opening ceremony of the business in the Parliament conference in this magnificent debating chamber, and to welcome you all to it.

This is our fourth business in the Parliament conference. Like all the previous conferences, it has been jointly organised by the Scottish Parliament, particularly through the Economy, Energy and Tourism Committee, and the Scottish Government. It has been organised with the aim of providing you-all of you are experts in business-with the opportunity to inform parliamentarians and Government of your priorities. I met a number of you last night, so am sure that the opportunity will not be wasted.

There is a wonderful Chinese proverb:

"If you want a year of prosperity, grow grain. If you want ten years of prosperity, grow trees. If you want a hundred years of prosperity, grow people."

The Scottish Parliament is very much in the business of growing and empowering the people of Scotland. As a modern participative democracy, Scotland has earned an international reputation for our focus on people, for our bottom-up rather than top-down approach to politics, and for the way in which we seek to engage innovatively with our people. We listen to what they say and we seek all the time to build a sustainable future for Scotland, based on that voice.

A key theme of several of my recent speeches has been that we are all Scotland's people and that we all need to work together to grow our great nation. The belief that we need to put all our energies, thoughts, skills and experience into helping Scotland to flourish is at the heart of our parliamentary life. The best growth that we can hope for is growth that involves the expertise of all Scottish people: our teachers, our information technology and financial experts, physicians, scientists, environmentalists, civic society, artists and our businessmen and businesswomen, including all of you who are sitting in the chamber today.

Under today's theme, which is "Opportunity challenge-achieving sustainable economic growth", Parliament and the Government are seeking to involve the business world directly in growing Scotland. Today is about listening to your expertise: it is not simply a tick-box exercise, but a serious effort to feed your voice directly into the policy-making process. Following the conference, that voice will be laid out in the form of a report.

Around the chamber today, there is a mutual understanding that focus on the economy and the future is key to Scottish growth. That should come as no surprise: we are talking about a people whose history has given the world great Scots and Scottish inventions such as Alexander Graham Bell and the telephone, James Watt and the steam engine, and Alexander Fleming and penicillin, to name probably the three best-known Scottish inventors and their inventions. We are talking about a people who are still known today for their innovation and inventiveness.

We are known for our world-class financial services industry, which is in constant growth; our renowned life sciences sector; inventions such as computed axial tomography and magnetic resonance imaging scanners; and our diverse and vibrant energy sectors, from the oil and gas industry, which has 2,000 service and supply companies active in more than 40 countries worldwide, to our quarter of Europe's current wind resources and more than a quarter of its potential wave and tidal resources.

We should not forget our strong engineering heritage, with our innovations in industries such as optoelectronics and nanotechnology, or our 1,200-company-strong food and drink industry, which is making a name for itself as a major exporter. Whisky is vying strongly for top place on the list of exports.

We in the Scottish Parliament also recognise the important role of the economy in Scotland's future-our Economy, Energy and Tourism Committee provides but one example. In its current tourism inquiry, it is considering whether the Government's target of a 50 per cent increase in revenue from tourism by 2015 can be achieved. That inquiry will identify and suggest measures to address the key challenges.

Only last month, the committee joined forces with the Scottish Trades Union Congress to host a half-day seminar called "The Scottish Workplace and the Productivity Challenge", which explored why Scotland's workforce lags a little behind other countries in productivity. The committee is listening to employers' expertise on issues such as workforce development, investment in infrastructure, and measures for improving productivity. In the spring, the committee will begin another inquiry, into Scotland's energy.

The Scottish Parliament & Business Exchange is another example of our efforts to engage with the business community. For those of you who are not familiar with the exchange, it aims to provide MSPs with direct experience of business and to give businesses the opportunity to experience a little of parliamentary life. One of my first engagements as Presiding Officer was to host the relaunch reception for the exchange, and as its honorary president I earnestly hope that it will go from strength to strength in providing vital engagement between Parliament and business.

Some of you might be members of-or be aware of-Scotland's Futures Forum. For those who are not, it is a body in which MSPs engage with policymakers, businesses, academics and the wider community to consider the challenges and opportunities that Scotland will face in the future. The forum has been considered a best practice model and the UK Parliament and the Welsh and Northern Ireland Assemblies have based their futures work on it. It has already published its first report, "Growing older and wiser together-A futures view on positive ageing", and it has now moved on to a project to consider how, by 2025, Scotland can reduce by half the damage that is done to its population through alcohol and drugs. That project will conclude with a major event in the chamber in June.

On top of all that, we have a large number of cross-party groups in Parliament on a range of subjects, from the Scottish economy to oil and gas to crofting. Also, a multitude of briefings and events take place in Parliament-there is one almost every night-involving a range of organisations, from the Scottish Food and Drink Federation to the Freight Transport Association to the National Farmers Union of Scotland.

The Scottish Parliament also supports the Government-strongly, I hope-in international liaison. Our efforts to build relations with legislatures and institutions throughout the world help to create wider opportunities for a number of links, and particularly business links. Since the beginning of this year alone, we have had visits from the President of the Australian Senate, the vice-president of the Catalan Government, the Italian ambassador, and the New Zealand high commissioner, among others. I look forward to leading a parliamentary delegation to the USA and Canada at the end of March as part of the Scotland week celebrations.

I conclude my remarks with a thought from that great Scots businessman and philanthropist Andrew Carnegie, who said:

"There is no class so pitiably wretched as that which possesses money and nothing else."

We are all conscious of the importance of the economy in growing Scotland, but for that growth to be sustainable, it must involve more than just economics. It must continue to come coupled with the Scots' spirit of compassion so that the opportunities to come are for not just some of us but for all of us.

I wish you productive discussions. I hope that you have a genuinely enjoyable conference as well as a productive one and I ask you to continue engaging with this, your Parliament, in the future.

It gives me great pleasure now to invite the First Minister, Alex Salmond MSP, to address the conference.

09:09

The First Minister (Alex Salmond): Presiding Officer and friends, I am in an extremely unusual position because this is the first time I have spoken to those who are in the chamber while facing them. Normally, I sit where Professor Kay is sitting this morning. I think that Tavish Scott is the only person who is sitting in his normal seat. However, there are a lot more people in the chamber this morning.

The shape of the chamber, by the way, was not the brainchild of Señor Miralles, talented and innovative architect though he was. Its shape was the brainchild of Sir David Steel. The chamber that Señor Miralles originally envisaged was, as I described it at a meeting with him, shaped like a banana. It was an elongated shape. As I looked at the model, I suggested to Señor Miralles that it was similar to a banana. He said:

"It is not a banana; it is my chamber."

I said that if I was debating with Mr Dewar, I would need binoculars to see from one side of the chamber to the other. In response, Señor Miralles said that his

"chamber is not for debate, it is for communing."

So I hope that you have a good commune today.

There are many people in the chamber. I thought that the objective of business was to slim down the number of politicians-as far as I can see you have managed to double or treble the number of people in the chamber. To contrast with Westminster, the chamber there-which, incidentally, is probably the only aspect of the Palace of Westminster of which I approve-is a tight and compact stage. There are 650 members of the Westminster Parliament, but there is room for 300 crowded on the benches, if you are lucky. The Scottish Parliament chamber is about four times the size with about one fifth of the number of members, which means that every member of the Scottish Parliament has 20 times the space of a member at Westminster, which may or may not make it difficult to commune. Nonetheless, this chamber carries great authority. I hope that you look forward to your debates-or your communing-today.

I am delighted to deliver the opening address in this year's business in the Parliament conference. This is the fourth such conference, although not all of them have been in this building. The most recent event was in 2006. I now realise why there was not an event last year-no doubt MSPs from all parties were preparing for some other enterprise, such as coalescing or debating in the election campaign. I am delighted to see so many colleagues here, particularly our friends from the business community. I hope that everyone enjoys the experience.

Throughout the parties in Parliament, in the Government and in the body politic, we are taking a fresh look at Scotland's economy. I detect a new attitude throughout Parliament. I hope that it is a can-do attitude that does not consider the policy constraints-except with the intention of removing them-but instead asks what we can do, rather than worry about what we cannot do. We are not yet in a perfect position: to take one issue that may occupy the minds of many people today, the Scottish planning system is in need of substantial change. However, that is understood throughout the political parties. Indeed, a framework for change was put in place in the previous session of Parliament. The test will be whether, in the next year of the present session, we can develop a planning system that is an advantage for Scotland, rather than a comparative disadvantage.

The Government has an overarching economic strategy to increase sustainable growth. The idea is that, by the end of this session of Parliament, we will match the United Kingdom's rate of growth. That is a relative statistic and it is meant to be one, for reasons that I will explain in a second. Thereafter, as a medium-term target, we aim to raise the rate of growth in Scotland to that which has been enjoyed by the small independent nations that surround Scotland in what we call the arc of prosperity.

The relative target is to increase our rate of growth in order to close the gap between the performance of the Scottish and UK economies that has, to a greater or lesser extent, prevailed for the past generation and certainly for the past 25 years. The target has been cast deliberately as a relative one because we live in a world in which economic conditions affect everybody. As we know, we are all interconnected and interdependent. However, there is no particular reason why, if we emphasise our comparative advantages, the Scottish economy-within a single framework-should not perform as well as the UK economy as a whole.

In what are acknowledged to be increasingly challenging economic times, there are already some indications from retail sales, business confidence and house prices that the Scottish economy, while it is not immune to international conditions-not that it could ever be-could close the gap relative to the UK economy, if not in a downturn then in a contracting economic environment. We would obviously like to close the gap in an expanding economic environment, but it will be no mean achievement to move-as well as keeping our eyes on the potential to match other better-performing economies-towards closing that gap over the next four years.

Statistics can be the stock-in-trade of economists and, often, politicians. We like playing around with them, and it is often said that there are lies, damn lies and statistics, or that, if we were to lay all the economists in the world end to end, they would never reach a conclusion. I am sure that that is the case for politicians too-and, perhaps, even for businesspeople. Statistics do matter, however. Even a marginal change in the Scottish rate of growth, accumulated over time, makes an enormous difference to the impact on living standards and prosperity. Last week, I was in Dublin. Twenty years ago, gross domestic product per head was 30 per cent lower in Ireland than it was in the United Kingdom, whereas today it is almost 40 per cent higher. I reiterate: gross domestic output in Ireland has over the past 20 years moved from being 30 per cent behind the UK to being almost 40 per cent ahead of the UK. Although Ireland's growth has been spectacular, the marginal change might not have looked extraordinary in each year. The cumulative effect is extraordinary, however. Scotland's having grown at roughly 1.8 or 1.9 per cent over the past 25 years, compared with the UK's having grown at 2.3 per cent, does not sound like a huge difference, but the cumulative effect over the period is enormous. A marginal change in the performance of the economy can result in an enormous change over time.

I want to talk about Parliament and the Government working with business. Firms, companies and businesses hold the key to achieving the ambition of prosperity. Strong and sustainable economic growth will ultimately depend on Scotland's businesses succeeding in global markets and capturing new sectors and new markets. The job of the Scottish Government and the Scottish Parliament is to do everything within our power to enable success. The Government recognises that challenge, and we are trying to achieve that ambition.

Infrastructure has a key role in public policy. We recently decided to proceed with the M74 motorway and very recently, we removed the tolls on the Tay and Forth road bridges. Less recently, we took the decision to go ahead with the new Forth crossing. As I have said, we are committed, across the Parliament, to building a new and responsive rapid planning system.

In my view, this Government's first budget-which was passed, by some miracle, in this chamber only two weeks ago-combined important measures to support enterprise and innovation. The budget provided for lower business rates, especially for small businesses, which is a policy that the Government pioneered, although it is fair to say that we were encouraged by other parties in the Parliament to move quicker and faster. It contained incentives for research and innovation, particularly in renewable energy-which the Presiding Officer mentioned-but also across the range of areas in which Scotland can succeed. The budget also contained new support for social enterprise, which I hope shows a growing recognition of the importance and performance of the third economy within a modern society. Those are our early decisions: they are the first phase of the reforms that we will put to Parliament, and have the common purpose of strengthening and invigorating Scottish economic performance.

As we study a variety of economic systems and economic successes and failures, we note that there is a host of things that a Government, a Parliament or an economic policy maker can suggest or prescribe to make an economy successful. Innumerable policies, stratagems, incentives, schemes and wheezes can be tried but, in reality, only two things really matter: if you study any economy anywhere, any time, only two things are absolutely critical for success. The first is mobilisation of human capital-to educate and train the people, to exemplify and to create advantage in the performance of the population in skills, training, abilities, innovation, ingenuity and entrepreneurship. Human capital is critical. Incidentally, human capital will be the scarcest resource of all in this coming century.

Secondly, we have to build and identify areas of comparative or economic advantage in the economy. If you think about it, the reason why we have to do that is obvious, and Scotland exemplifies why it is obvious. If all we do is train our people to a really high level, produce more research papers per head of population than any country in the world and produce exceptionally high-quality graduates, we can produce smart, successful Scots, but that in itself will not necessarily create a smart, successful Scotland. If we do all that without there being comparative advantage in the economy, what we produce will be the smartest, most successful, brightest, most intelligent airport departure lounges in the world. In order to have a successfully performing economy, you have to match and marry human capital to comparative advantage-to a reason, an edge and a decisive incentive to allow that human capital to be deployed in our own economy.

About 10 or 12 years ago I went to Ireland to make a film on the Irish economic tiger. On that occasion, I was asking the questions, as opposed to avoiding answering them. I interviewed a guy called Ruairi Quinn who was the then Irish finance minister-I see Tavish Scott laughing knowingly-and a Labour politician. I asked him a question that indicates that I will never replace David Dimbleby or Jeremy Paxman as an inquisitor. I asked, "Look, to what do you owe your economic success, finance minister?" The question was totally mundane; the answer was totally brilliant. He said that, 10 years ago, the Irish parties recognised that Ireland was an undereducated society. At a time of huge economic stringency in Ireland, they diverted resources into education in the knowledge that many of the young Irish people who took advantage of that educational incentive would go elsewhere to pursue their careers-to London, New York or wherever. They also recognised that if they got the competitive conditions correct in the Irish economy, those people would come back. "What has happened to Ireland," said Rory Quinn 10 years ago, "is that they are returning."

The reason why that was a brilliant answer, of course, is that if you were to ask most politicians-such as me and the others among you today to what we owe our economic success, they would probably say-or John Swinney might say-"My budget two weeks ago was absolutely brilliant." I might ask Tavish Scott, "To what do you owe your success as an Opposition politician?" He might say, "Well, I think that my particularly clever question to the First Minister last week put him on the spot." A question to me might be, "To what do you owe the credit for this latest innovation in Scotland?" and I might answer, "Well, I was leading the way as First Minister." I thought that Ruairi Quinn's answer 10 years ago-that they had built the foundations of a new society in Ireland-was fundamentally brilliant because it acknowledged that the building blocks that change a country are not made in one statement, one budget or one set of policy proposals, but by a collective understanding of what has to be done to shift an economy and a society.

Let us be clear: the one reason why I am confident that we can build a Celtic tiger economy-or a Celtic lion economy-in Scotland to equal or surpass the Irish economy is that we are starting from a position of much greater strength, power and financial strength, and we have a much greater industrial heritage. What Ireland has done can be done: Scotland should be able to rival, or to better, that performance. However, we have to have the same understanding of what has to be done to shift the economic views in society.

The rules of the game have changed in Parliament: I lead Scotland's first minority Administration, which depends on commanding support from throughout Parliament. That makes votes very exciting. I am surprised sometimes that there is not much more concentration on votes, because members all hang on every single vote. A minority Administration is an interesting way in which to conduct business. Having seen large majority Governments in another place, I think that a minority Government has many advantages, although it also has one or two disadvantages.

I hope that today's event illustrates-both to those who have been to previous events and those who are here for the first time-one of the things that the Scottish Parliament does outstandingly well: accessibility to MSPs of all political parties.

A theory is abroad among some economists that the optimum population size of an eco