Seòmar agus comataidhean

Our next item of business is an evidence session on the Scottish Government’s response to our report on our inquiry into Scotland’s supply chain. In that inquiry, we looked at the short-term and medium-term structural challenges that Scotland’s supply chain faces, and how the challenges and shifts in supply chains are impacting on Scotland’s economy. The committee published its report on 20 April, and the Scottish Government responded on 4 July. The purpose of today’s evidence session is to consider that response and to discuss in more detail the issues that were raised with the Minister for Business, Trade, Tourism and Enterprise.

I welcome to the committee the minister, Ivan McKee MSP, who is joined by witnesses from the Scottish Government. Andy Park is head of economics in the Transport Scotland strategy and analysis division; Graeme Cook is deputy director in procurement services; Carron Flockhart is unit head in skills planning and sector engagement; and Dermot Rhatigan is deputy director for manufacturing and industries.

As always, I ask members and witnesses to keep their questions and answers as concise as possible.

I invite the minister to make an opening statement.

Thank you very much, minister.

You recognise the breadth of the report, and members will look to cover many issues. We appreciate that you are not responsible for all those issues, but we welcome the fact that you have brought support with you. I hope that we can have a broad discussion.

The driver for the report was the impact of Brexit and the pandemic on supply chains. More recently, there has been the war in Ukraine, which is putting pressures on them. From the evidence that we heard, the committee felt that there needed to be more resilience in the Scottish system and concentration on shorter supply chains and more local supply. However, the Government’s response did not really take that broader or longer-term view. We recognise that lots of work is happening in different areas, but we did not really get the impression that there was a shift or that you were thinking about how to respond to not just the existing pressures but the likely future pressures, given the impact of climate change and other global issues. Is there a longer-term strategy or focus to make Scotland more resilient?

However, the project plans do not include specific milestones or targets for economic inactivity. The reduction by 20,000 that you mention is welcome, but do we know why that happened? Has it been because of proactive engagement by the Government, or has it happened because the labour market is tight? The evidence that we have heard during our inquiry and in relation to the budget suggests that there are concerns about the cut that has come in with regard to employability services. The businesses that we heard from last week told us that they need help to bring a group of people into the workforce, and that there are still challenges around part of the labour market.

I am sorry; I meant that there are challenges around employing people are economically inactive and need additional support to come into the workplace.

In its recommendations, the committee suggested that the supply chain development programme could be expanded. You have spoken about future supply chains in growth areas such as renewables and life sciences. We also had concerns about existing supply chains that people rely on every day, such as those involving food products. Like many other western nations, we depend on imports to a large extent—we saw disruption in that regard during the pandemic. Would the supply chain development programme include that kind of issue? Is there a drive in Government to consider whether a reliance on imports is the right balance, or is that issue not a priority? Should we change that?

Is the development programme a cross-departmental one?

I call Colin Beattie, to be followed by Michelle Thomson.

In the budget, there is a proposed reduction of £53 million in the employability budget for this year. That money is focused on those who are furthest from the labour market. The Government has justified it by saying that the labour market is tight and that people are not short of employment. However, it would reduce the services available to the harder-to-reach members of the workforce. Do you have any concerns about that?

Our next item of business is the second cost crisis evidence session as part of the committee’s pre-budget scrutiny work. The purpose is to inform the committee’s pre-budget scrutiny work with the aim of influencing the budget before spending priorities for the next financial year are decided on.

I welcome to the meeting Euan Clark, the commercial director of the Scottish Building Federation; Ian Laird, the chair of the Scottish Textile Industry Leadership Group; Paul Sheerin, the chief executive officer of Scottish Engineering; and David Thomson, the chief executive of the Food & Drink Federation Scotland. David joins us online. I thank the witnesses for joining us.

We decided to look at the cost of doing business as part of our budget scrutiny, but that was more than 45 days ago and quite a lot has happened during the past 45 days. Our reason for that was high energy costs and recognition of the fact that your sectors are high energy users. Has the response from the Governments been sufficient for you to cope with the rises that you have seen? Does there need to be further action by the United Kingdom Government, in particular, which has come forward with measures on energy use?

The committee is looking at the cost of doing business. What are the factors that drive that cost up for your members, Paul Sheerin? Is it energy, or are other factors more significant?