WEDNESDAY 29 JULY 1998

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

  380.  Is there any special reason why this should be or is Glasgow principally seen as a dumping ground for low paid service type jobs rather than high paid high tech type jobs?
  (Mr Beveridge)  Actually there is a reason but I would also have to say that Glasgow should not be seen as a dumping ground for the low paid jobs. Its record over the last several years in attracting both fairly high level call centres, financial centres and indeed some software activity where it is now doing some major activity is very high. These have been city centre jobs that have been of quite high value. The big issue now about Glasgow is a lack of sites. It has always been difficult for us to persuade inward investors to go into what we might call brownfield sites so we have had to try and work with the Glasgow City Council to release sites around the city as they have now done in places like Robroyston. There are seven major sites that are either in development or on line and we feel quite confident that we will be able to find inward investment of a manufacturing nature on to those sites, and very good ones.

  381.  That was the next question I was going to put to you. What can inward investment do or what can be done to make inward investors use some of the brownfield sites because the city is awash with derelict sites?
  (Mr Beveridge)  Yes.

  382.  And in some cases contaminated land. Can anything be done through inward investment policies and projects to utilise some of these sites?
  (Mr Beveridge)  I think we can. I think that is one of the areas where we try to use our property and environmental powers. Many of the activities that are going on now, the new BT building in Glasgow for example is going up on a derelict site, there are a couple of buildings going in behind that. The new Stakis headquarters building in Glasgow is on what was a derelict site. If we again target the inward investors correctly I do not think we are going to bring manufacturers into the centre of town very easily but there is no reason why we cannot bring headquarters, call centres, marketing operations, software operations into those and bit by bit the GDA have been working a plan to try and remedy some of those brownfield sites.

  383.  It is not the centre of the town or the perimeter, it is the inner belt.
  (Mr Beveridge)  Agreed.

  384.  Where there are substantial problems and also tremendous opportunities if they are taken up.
  (Mr Beveridge)  It is a big problem and compared to the balance of people that will move to those kinds of sites it will take time but there are real signs that is working now. Glasgow City Council has been extremely helpful in helping us free up some sites that they think will be quite useful for inward investment.

  385.  Are there any special initiatives which you can think of or are you working on any special initiatives to try and tackle this problem because it is the one Metropolitan area of Scotland?
  (Mr Beveridge)  As well as the actual projects that we are trying ourselves, obviously we have had a very strong push into this area of call centres because they are one of the areas that you can get into city environments relatively easily. In addition, however, we have been ring fencing money each year, about three million pounds each year, to GDA to help turn some of the brownfield sites back into housing areas as well so we can make some progress in bringing people back into some of those areas in the city as well. We have a couple of fairly reasonable programmes going there I think. It will take some time.

Chairman:  Can we move on to the playing field and Michael Moore.

  386.  Mrs Macfarlane, four weeks ago you sat on stage in Hawick at a public meeting discussing various problems that there are in the Borders. One of the things that has been mentioned already this morning is the importance of not talking down the textile industry in particular. The thing that is causing great concern in the Borders, indeed in many parts of Scotland, is that just at a time when the textile industry is in its moment of greatest crisis, potentially, there are moves afoot to end the funding for the Scottish Textiles Association. While it was part of the original agreement that the funding would be there for three years, I believe, do you not agree that this is now a deeply insensitive or inappropriate time for the funding of that organisation to be stopped?
  (Mrs Macfarlane)  The decision, as you rightly say, was taken in 1995. 1995 the Scottish Textiles Association had three years worth of funding which I think the original agreement had been with them. We reviewed the situation then and agreed we would give them another three years of funding but that would be the absolute limit. The reason being that we were trying to encourage textile companies to become involved in the Textiles Association and really that has not materialised in the way we would see as a success. The Textile Association was set up as a means to an end. Setting up the Textile Association does not help companies directly nor does it solve employment problems. I would suggest that the Textiles Association is not going to solve the Borders problem. The answer to your question is that we are withdrawing support from the Textiles Association but we are not withdrawing support from the textiles industry or the textiles companies which we can help. As you know from your experience in Howick both the Minister and the Local Enterprise Company showed every evidence that they intend to do everything they can to help the companies that are there succeed if that is possible to achieve. As far as the Textiles Association is concerned, I have been having discussions with Tony Tailor, who is the Chairman, with a view to perhaps keeping the Board going because that does seems to be quite a useful grouping of individuals who are a useful advisory committee and the Textiles Association I think would possibly continue to act as a focal point, a co-ordinating organisation. What we are doing is we are taking the core funding which is paying for staff and for premises because that does not appear to us to be a good use of a substantial amount of money that could be diverted to other ways of helping the textiles industry.

  387.  Why has the Association failed?
  (Mr Beveridge)  It was not supported by the textiles industry.

  388.  The follow up question must be why did they not support it? Why did they not think it was worth supporting?
  (Mrs Macfarlane)  I do not have readily to hand an answer to that except that it does occur to me that the textiles industry is very diverse and there is a need I think to be more focused. Obviously there are industrial textiles, there is lace making, there is the woollen industry, there are all different sorts of industry. I think trying to establish a single body to address too many things in a pan-Scotland way has been a difficulty. Textiles companies themselves have not seen the need to come together to support the Association as being the body that is going to work for them and provide a service for them.

  389.  One of the big themes for the whole of Scotland, particularly resonant in the south at the moment, is the need to diversify. It worries me slightly that you suggest that everybody is retreating into their own little cliques because they do not see common interests with other types of textiles. One of the issues the existing textiles manufacturers have to consider is diversifying into new areas, therefore there is still a role for a Scottish wide organisation, to share understanding, skills and thoughts as how diversification might take place. It is not the case where the private sector will not support the association for whatever reasons, good or bad, then that is exactly the situation where your agency should be there making sure something continues?
  (Mrs Macfarlane)  We did. That was the history of this organisation. We thought we would lead by setting a body up with a view to encouraging the private sectors to come along and adopt it. We do not see ourselves as being an organisation which props something up like that forever. We felt that it would be another way of supporting the textiles industry and particularly the Borders and that is precisely what we will do. The Borders, the Local Enterprise Company in the Borders will be looking at ways of bringing the company and the Borders together. Other LECs will do likewise and indeed LECS will come together. Five LECs will be looking to co-ordinate their activities to ensure that there is that sort of broader view taken. They will not retreat, as you say, into their boxes. It is just a matter of hatching the decision taking on the STA from what the network and other companies would be doing either individually or collectively for a textiles association.

  390.  How quickly would something like the Borders Textiles Forum or whatever it might be called actually be set up?
  (Mrs Macfarlane)  I have no idea. I am sure that is something that Borders Enterprise will be working on just now.

  391.  One of the problems that we hear about frequently in the evidence we have taken so far, and certainly in the visit we did last week, is the need for a level playing field, the need to ensure that companies on both sides of the Border or indeed within Scotland are treated equally. There are two different aspects of that level playing field. We know that Via Systems, the printed circuit board manufacturer based in Galashiels, has struggled to get any assistance for the substantial capital programme that it has undertaken, not least ten million pounds in the current year. The sister company in the Via Systems group, ISL in North Tyneside, has had something like £15 million of its £60 million infrastructure and factory building programme paid for out of public funds. It does not take a genius or even an accountant to be able to work out that there is a great deal more economic viability in a project which has had £15 million to support it in a state of the art new factory compared to a company which has developed some inadequate sites over a period of 20 or 30 years. I would be interested to know your view on that? The other aspect was highlighted when we visited a company in Kelso, Keltech, who highlighted the fact that they spend enormous amounts of money training their staff who then are poached. They have very exciting projects where they keep a competitive advantage by investing in video conferencing links with each of their customers and the investment they put in gets around the hurdles customers perceive of isolation in a rural part of Scotland. They train a lot of people up in the production techniques and, marketing and then a new company comes into the central belt, funded by inward investment money, and takes away key staff from the Borders on the basis of salaries with which the Borders' company cannot compete. Again, another type of lump in the playing field which is a real strain on local companies. Can you perhaps comment on this, Mr Beveridge, and then, Mr Robertson, perhaps you would tell us if it happens in the north of Scotland as well?
  (Mr Beveridge)  Plainly this is one of the unfortunate vagaries of this assisted area map that my colleague referred to earlier. It is the fact that just across the Border we have an assisted area status area and at the moment there is nothing we can do about that. That is the way that the Government has laid out those particular area plans. I agree with you, it makes it extraordinarily difficult to hold on to an investment on this side of the Border against any reasonable financial analysis that is done. On the poaching of people, that is a difficult one. One of the reasons that we get our skills group involved very early is to try to make sure that for each of the industrial sectors we are dealing in that we try to have some forward view of what their needs are going to be and work with the local colleges and universities to try and make sure that there is an adequate supply. Almost certainly when we bring in an inward investor they are not going to take all of their people at the very lowest level and train them from scratch, they are going to have to have some people with experience and there will be a natural flow around in the economy. Our hope would be that is never devastating to any one company and that the people we bring in would put their own training programmes in place, feed back their own people into the economy the next time somebody is hiring, be it indigenous or an inwardly invested company. So we would hope the swings and roundabouts would take care of that in the long run. It is a problem and it is one we often hear each time we bring in an investor, there are concerns raised by other competitive companies that that will mean they will lose some people.
  (Mr Robertson)  People unfortunately have been the largest export from the Highlands and Islands for far too many decades. We have just now managed to reverse that trend in substantial portions of our area but certainly not in the outer islands or in Caithness and Sutherland in the north. Our strategy is to try and grow the population of the Highlands to try and bring work into the area, bring families, repopulate villages, bring people into schools. I suppose you could say we are, as an organisation, in essence poaching from the whole of the rest of the UK and indeed from Europe. It is done obviously on a very small scale and when there is any question of our businesses locating from another part of Scotland to our area we always consult the Local Enterprise Company in that area. We have a dialogue with them about the balance of assistance. We have had no complaints from people outside our area about companies in our area pinching people. Hopefully as our inward investment strategy is successful we will see more work in the Highlands and we will see people moving into the Highlands. We may at that point get some complaint. If I could add a point that I think is very important. We made an investment some eight years ago now in a joint venture with British Telecom to bring in an ISDN system into our area which has netted us in excess of 1,000 direct jobs and as a result is being able to put small call centres into our area. I do not think there is a finer investment that could be made for the Borders area than that equivalent system. I believe that BT have a programme of rolling this out but that is an area that I am sure Scottish Enterprise and Local Enterprise Companies will look at.

  392.  I am sure Mr Beveridge is listening very carefully.
  (Mr Beveridge)  Yes. Well, in fact we just launched a programme like this in Dumfries and Galloway last week. I was down there doing that last Friday, a very similar programme where they have worked in this case with Scottish Telecom for big broad band lines to come into their community. It looks like it is going to be very successful in trying to wire up more of their community and I think that will be a very successful programme.

  393.  How do you see it widening the scope of the level playing field argument? Where is the European dimension? How difficult is it to compete with Ireland, for instance, right at this moment in time? One of the comments we heard in evidence said that a company that was supplying to a major multi-national had now been told that they might lose the contract next year because this corporation had worked out it might be cheaper for them to build a brand new manufacturing plant in the Republic of Ireland to manufacture the supplies they currently get from this Borders based company. Clearly if they do that that is a very fine judgment they make on the basis of the number crunching. Is this a pattern you often see? Is there anything that can be done about it?
  (Mr Beveridge)  I do not believe anything can be done about it. It happens, of course, because the one significant advantage the Irish have is in the lower corporation tax rate in that they are willing at the moment to offer inward investors a ten per cent tax rate. That is very, very attractive to many of these companies, particularly companies that are on a high growth rate and are trying to conserve cash. In almost every case when we lose to Ireland it is the tax issue that loses it for us.

  394.  Do you think the Scottish Parliament should be able to vary the corporation tax?
  (Mr Beveridge)  I do not believe that is within its power.

  395.  Do you think it should be?
  (Mr Beveridge)  I am a simple public servant. I would not want to comment on policy. It is a very powerful programme for the Irish, I can tell you.

  396.  Mr Robertson?
  (Mr Robertson)  I think what we have to do in the scenario we work in is to play to our strengths. Our strengths in Scotland are clearly our people throughout the whole of Scotland. Offering developers packages that are similar to what is available in other countries is fine but if we can offer them the best trained workforce that is where inward investors are going to come. That is frankly what is selling the Highlands to people because they get a loyal workforce, and they get a workforce that turns up on a Monday morning, it is not dead beat as a result of struggling on the tube or driving around the M25 or something. We are really concentrating on people, programmes such as Investors in People. We are encouraging all our bodies to go through that. That is the future: it is people, skills and the young people, particularly preventing them leaving early.

  397.  Are you suggesting that everybody in London is a dead beat?
  (Mr Robertson)  Far be it from me to suggest that. As an ex commuter I can confirm that you do not arrive in your office as fresh off the tube, sometimes you do not arrive at all, as you do when you drive leisurely, in a leisurely fashion, across the Black Isle.

  398.  Can we look at transport for a moment, talking about driving across the Black Isle. How important are transport links? I am thinking particularly of Renfrewshire where they have become of huge importance to us given that we have great difficulty getting manufactured goods which are made in Renfrewshire out of there now? There would once have been a time when things would have gone out in the ports in Renfrewshire but that no longer happens and you cannot get goods across the Clyde. How important are transport links?
  (Mr Beveridge)  We think they are very important in this, certainly. We have been quite vociferous in our support of the M74 extension for that reason. Our experience is indeed that most—not all—inward investors are put off by the transport links into the west of the Kingston Bridge area, let me put it that way at the moment. Until we can resolve that, that is going to be a constraint on growth.

  399.  What resources have you committed to improving it?
  (Mr Beveridge)  We have a small group in Ray's organisation that does all our physical business of infrastructure, including transport policy. We have been trying to do our best to affect policy. Obviously we do not have a lot of money to spend on transport infrastructure, it is not particularly our job. We can work with the transport bodies that are in place and with the Scottish Office to try and feed back to them what we think are some of the policy implications of certain acts that they would want to take.
  (Mr Robertson)  Transport is even more important to us because, as I say, we have over 100 inhabited islands. Many of our goods have to come by costly ferries or by inadequate airlines to our airports where the service is intermittent anyway because of weather. It is very important to us and it is an area where HIE, the network of LECs, works very closely with the local authorities and indeed, as you probably know, we have been severely prejudiced by British Airways diverting our daily flights to Gatwick from Heathrow. That prevents us getting the proper interlining that a modern inward investor location really needs because hassle is something the foreign businessman visiting to buy goods or services or to inward invest does not want to have. Transport is a huge issue in the Highlands and we welcome the attention transport is getting from the Government at this particular time.