WEDNESDAY 29 JULY 1998

MR CRAWFORD BEVERIDGE, MRS RAY MACFARLANE, MR IAIN ROBERTSON and DR MAURICE CANTLEY

  360.  With many language skills where many parts of Scotland other than Edinburgh might have suffered.
  (Mr Beveridge)  Absolutely. That is why I am saying—and I think my colleague would agree—we need to target rural investments very, very carefully if we are going to get them. It is not everyone that comes along that will fit neatly into a rural community even though you can say "Well, it is a call centre, why can it not go there". The answer is there are all sorts of different kinds of call centres and we need to target the kind of size and type that you want to be able to get to fit into that area. In the past, we have had fairly simple measures for Locate in Scotland, we have measured them on projects, jobs and investment. Like all sales people if you are faced with the opportunity of spending the next three weeks trying to sell these 50 jobs on going to Dumfries or these 500 jobs on going to Lanarkshire, the chances are you are going to spend the three weeks getting the 500 because those are the targets that you are measured on. Now we are going to set up a rural unit and presumably give it some targets of its own and try and get that to operate and hopefully we will see if we can find some results from it.

  361.  Do you think in actual fact, because of the way that LIS sets its objectives and because of the special requirements of the South of Scotland, that there is a need for your activities for the South of Scotland to be hived off to a South of Scotland Development Agency as an equivalent of the Highlands and Islands Enterprise, leaving you to concentrate on the central belt?
  (Mr Beveridge)  I think I am going to sidestep that one a little bit and say I am just the machine operator here. I will operate whatever machine people give me to operate. I see no reason why we cannot operate effectively through the two Enterprise Companies that operate in southern Scotland today.

  362.  Just to pick that up, you have said there is a number of obstacles to you being able to attract it inward investment. Are you saying that your hands are absolutely tied as it is because you cannot affect the infrastructure, you cannot affect the skills base, you cannot affect the assisted area map so you have no role to play?
  (Mr Beveridge)  No, I think what I am saying is that given that some of these things are given in our area now—and Ian should speak for the Highlands separately on this because there are some different issues there—that means we have to do much more careful targeting. Those things do not overwhelm the ability to be able to get that organisation to come in.
  (Mr Robertson)  Perhaps if I may I might be able to add a little to this debate. I have here the assisted area map of Scotland, with which you will be very familiar. This is the map that is contained in the Scottish Office's main pamphlets on where you can get assistance in Scotland. This is what goes out to all inward investors. When we look at this map you will see the Borders does not look as if it has any assistance at all yet it has because it has a Local Enterprise Company. The Highlands and Islands Enterprise area part of it is coloured as an intermediary area. The company interested in Scotland wants to know where it can get the best package, so by looking at the map it is being targeted right into the central belt. What I would like to see is a map which, for example, shows that in the whole Highlands and Islands area, which stretches from the very point of Campbeltown right up to between Forres and Elgin, our area as giving as advantageous packages as it possibly can. Our powers in our area are the equivalent in net terms to the inward investor to Scottish Enterprise's and the RSA powers in southern Scotland. This document does not tell the incoming company that. This document actually gives an incomplete picture of the assistance that is available in Scotland and a clearer picture would direct people more to the Highlands and Islands and more data on the bottom or more information would show, for example, what is available in the Borders area. I think this is a very important point for the Committee because RSA is not the only tool. We have training powers, Scottish Enterprise has training powers, we have marketing powers and there are all sorts of other things we can do to assist companies besides RSA. The map that is used to attract people should make that absolutely clear.

  363.  Helen Liddell, assuming she takes over Brian Wilson's portfolio at the Scottish Office, has campaigned against the pensions' industry for mis-selling personal pensions, so do you think she should now campaign against her own department for mis-selling Scotland?
  (Mr Robertson)  I think this would be a relatively easy change to offset what has been the columnised thinking of the past and put something in which is much more of a marketing tool rather than a rather prosaic brochure which belongs ten years ago.

  364.  That is a very, very bold criticism there. Do you share it, Mr Beveridge?
  (Mr Beveridge)  Yes. Iain and I have discussed this at some length and I think there are different powers which exist in the Highlands. This is an accurate document. It is like when you ask an accountant for information, it is a very accurate document but it does not tell you a lot. It would be useful to have it reflect more the marketing tool aspects of what Mr Robertson is talking about.

  365.  You are saying that map should be altered to show a whole range of support for companies that is available. Yet Mr Beveridge in reply to me earlier said that RSA is 75 per cent of any package that can be offered to inward investors. That map is accurate, inward investors will want to go where they can get their 75 per cent of the package.
  (Mr Robertson)  It is accurate for the central belt.
  (Mr Beveridge)  For the Scottish Enterprise area.
  (Mr Robertson)  It is not accurate for the Highlands and Islands area because for the packages we offer our powers are derived completely differently and we have derogations under European powers as well. It is not accurate for our area. Also I believe it undersells the white areas on the map where the LECs have training powers and marketing powers, often Objective 5b schemes, there may be LEADER programmes, there are all sorts of activities, the confidence that a Local Enterprise Company's powers can bring to influence people coming to an area. The training powers are particularly useful.

  366.  In Central Scotland 75 per cent——
  (Mr Beveridge)  In the Scottish Enterprise area, which is broader than Central Scotland, that is running from the Borders up to the Highlands line.

  367.  It is different?
  (Mr Beveridge)  Yes.

  368.  In the Highlands the RSA does not come into it at all?
  (Mr Robertson)  Very seldom. It would be fair to say that when we have a very big project, such as the Norbord facility between Inverness and Nairn, the numbers there were so large that we made an RSA application in addition to our powers to bring that about. We have done that for Norfrost in Thurso as well because they wanted to add to the freezer line a line that produced tumble driers and investment was made from RSA for that.

  369.  I am conscious of the fact that we are not half way through our agenda here and the time is moving on. We do need to make some rapid progress. If I could ask you what each of you consider to be the main influences on inward investment in the future?
  (Mr Beveridge)  From my perspective, there is certainly an issue now in terms of competition from Eastern Europe coming in in inward investment. I think our target markets we see, while they are reviewed each year, basically in the right kinds of areas both in terms of the sectoral areas that we look at and in terms of the geographical areas that we are trying to get inward investment from. The difficulty is that competition is rising at a remarkable rate for that inward investment and it is going to become an increasingly difficult thing for us to achieve.

  370.  Mr Robertson?
  (Mr Robertson)  I believe it is the infrastructural points, such as the telecommunications infrastructure, that need investment in the Highlands. That makes a big difference to us. We will have to keep it modern, we will have to keep it ahead of European areas, so that will require continuous investment. The level of skills of our people is essential. The thing that investors are most interested in is quality of labour and reliability of labour and educational and skills level of labour, so that is extremely important as well. We do not have the problem Crawford alluded to in property. We turn over our property portfolio which is much smaller than Scottish Enterprise's and we try to sell our properties to sitting tenants preferably wherever we can. Shortage of land could be a problem for us. We will try and use some of these community land powers to create small sites on the outskirts of villages. There are small inward investors too. We are looking at one at the moment that makes presentational gift materials out of glass, for example, that is a three person business but it is still an inward investment. The other influence is the environment. We have to be absolutely clear that what we are doing in inward investment in Scotland is sustainable in the longer term. The environmental influence is very important indeed. The other aspect is the culture. We must look for inward investors who will grow in our villages and our towns with the people and who will not destroy the culture but will become involved in the culture and add to the culture of our area. For example, the Gaelic language is actually a useful asset to the Highlands as well as a great cultural gift because we can create jobs on the back of the Gaelic language by bringing in publishing companies and television companies who will produce Gaelic programmes which are sold in Cape Breton and places like Ireland. A small example but the culture of the area has an important role to play.
  (Mr Beveridge)  One of the main issues for us, as I think we said in our submission, is how we drive up the value chain and get to much more of the R&D marketing headquarters kinds of jobs than we have in the past. That is a big challenge.
  (Mr Robertson)  I agree.

  371.  I agree with your comment, Mr Beveridge, about Eastern Europe not only in relation to inward investment but also in relation to tourism and funding from European Union. Do you have any suggestion as to how this could be combated?
  (Mr Beveridge)  My personal view is that is one of the reasons why we need to change our game and move more towards the value added kinds of investments. I think we have some things to offer in Scotland, particularly through our educational systems and research in the universities etc, that would be very attractive to some of the high level jobs of the kind that we saw in the Cadence investment, for example. I think if we want to continue to compete at the lower level on price alone, if you like, we are bound to lose out in the long term to some of these countries that are going very fast and have very large amounts of money to throw at things.

  372.  Are the organisational arrangements adequate to the challenge?
  (Mr Beveridge)  I believe so. I think the interplay between what we do in Locate in Scotland and our sectoral teams and things like technology ventures and our venture funds etc can do it. We learned some very valuable lessons during the whole Cadence project in that we put really big multi-disciplinary teams together partly from Locate in Scotland but a lot of them from our sectoral teams as well, as well as from finance and law and so on. That team worked very effectively to do that. We are just writing up the learnings of that now and we are going to start thinking about how we want to apply that in different sectors.

  373.  How do you compete with other UK agencies?
  (Mr Beveridge)  It is very hard. Plainly there are regulations in place, as you are probably aware. The Committee on Overseas Promotion makes sure that there is adequate information flowing between agencies when they all have an interest in the same potential company. If the company shows an interest in multiple areas of the UK there are rules in place which allow the DTI's industrial development unit to take the lead in terms of setting out the RSA conditions and so on. While there is a lot of rivalry between the regions there are lots of rules in place to make sure that we all try and play by the book.

  374.  Is there not sometimes a case that if a potential inward investor loses interest in a particular area that information is then forgotten about or would you pass it on to one of your competitors in the UK?
  (Mr Beveridge)  By and large the Invest in Britain Bureau through the Committee on Overseas Promotion system would know about any of these major inward investments we were doing. If the investor was lost to us they would almost certainly insist that others be allowed to go and talk to them.

  375.  Are you aware of any way in which you are at a disadvantage in comparison with other UK agencies?
  (Mr Beveridge)  No, I am not.

  376.  There is nothing that could be done to improve your situation?
  (Mr Beveridge)  No. I think our record, as you know, is remarkably good. We get somewhere between about 19 and 25 per cent of all the jobs coming into the UK so we are punching somewhere about two or three times above our weight in terms of people share. I do not think we would in any way feel we were disadvantaged against the rest of the UK. I have to say we rarely are competing against other regions of the UK, we are more frequently competing against other places, most noticeably Ireland.

  377.  Moving on to local authorities, what contribution do local authorities make towards attracting inward investment?
  (Mr Beveridge)  Usually because there is a land component here and some kind of planning component the local authorities are usually involved at a fairly early stage and have been exceptionally helpful partners, I would say, in being able to help us resolve how we get companies into local communities.

  378.  What happens when their priorities are not necessarily those of Scottish Enterprise or Locate in Scotland?
  (Mr Beveridge)  To tell you the truth, increasingly the priorities have been pretty much aligned. We have been strongly encouraging the Local Enterprise Companies to get to joint economic development strategies with the local authorities and, in fact, as part of the proposals that are going to be there on community planning, that joint economic strategy is one of the proposals they would like to see. We have regular meetings with COSLA, we expect our LECs to have local meetings with local authorities. All local authorities are now or are about to be represented on the boards of their Local Enterprise Companies so by and large, although there are still some cases of tension, the relationships are quite good.

  379.  It is claimed in the Glasgow area, for example, for almost each of the last 20 years the loss of jobs has been the equivalent of the Ravenscraig every year and yet the record of attracting manufacturing jobs in Glasgow by all parties involved has not been particularly good.
  (Mr Beveridge)  That is correct.