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There is quite a lot in that question. I will take the opportunity to give the committee an update. As members will know, the UK Government’s free port proposals came out more than a year ago. We looked at them at that point and decided that there were some fundamental gaps that meant that we could not sign up to them. As, I am sure, the committee will appreciate, we do not want to engage in a race to the bottom on environmental standards, labour standards and pay rates. We were seized of the requirement to ensure that a net zero component was central to any such initiative.

We discussed the issue with the UK Government over the course of 2021. In September, the UK Government came back to say that under no circumstances would it allow us to make the payment of the real living wage a requirement. It was also very lukewarm on the net zero requirements. As a consequence, discussions on the issue stopped. We then signalled that we were keen to move forward with our own proposals.

I can let the committee know that the UK Government came back to us to say that it wanted to reopen discussions. Those discussions are on-going. We had hoped to conclude them before the end of the year, which is when we said that we would publish our proposals. However, given that the discussions are on-going and could be reaching an end, we have decided that it is important that we follow that process through to its conclusion before taking the next steps.

We are hopeful that we will make progress on that and that a solution will come forward. At its core, that solution will include our requirements on net zero and fair work. That will be good for Scottish businesses, Scottish workers, the Scottish economy, communities and the environment.

The whole construction sector works like that, so I do not think that there is anything specifically different about public sector procurement in that regard. Clearly, we must understand what the market price is when spending public money. That must be done as efficiently as possible. However, there are some very practical things that we can do and that we do do to break up large contracts into smaller buckets, and we should look for opportunities to do that. I am very supportive of allowing smaller businesses to bid for and win smaller pieces of work, rather than facing into bigger contracts that make it difficult for them.

There are other things that we can do and that we are very supportive of, including smaller businesses working together to bid for some of the larger contracts that cannot be broken up into smaller chunks.

I think that we agree on where we want to get to; it is a question of working through the details. It is not that we are saying price, price, price—far from it. As I have said, we are moving away from that, and I am keen to work with businesses to look for opportunities to move further in that direction.

That is a leading question. We are on a journey and significant progress has been made in a number of areas, which I will talk through. However, I recognise that there is more that we can do. I am relentless in my engagement with procurement officials in the Scottish Government and more widely across the public sector, and I am looking for every opportunity to move forward in all those areas.

The sustainable procurement requirements in legislation are important. They focus on making sure that there are community benefits and local aspects to procurement requirements. The situation is far from being that we will only go on price; a whole range of factors are considered. In fact, choosing a provider based only on price is not an option. In public sector procurement, you need to look at a wider range of factors including local issues, sustainability, small and medium-sized enterprises and other factors as part of the decision-making process. We have moved a long way from choosing only on price, but there is more to do.

You also need to remember that we do not have free rein in that area, for good reasons. We are part of the World Trade Organization’s agreement on Government procurement. When Scottish businesses try to export, they expect the deck not to be stacked against them in international markets and there are requirements for that. Likewise, we have to have an open, fair and transparent process for competition in procurement in Scotland. What we can do is set the criteria as best we can within the international rules that are available to support that.

Looking at the results, the percentage of public sector business that is won by SMEs in Scotland is far higher than that in the rest of the UK, and it is way in excess of the targets that are set by the European Union. SMEs in Scotland win a higher percentage of public sector contracts than their share of turnover in the whole economy. That is positive and we have managed to deliver on that in recent years. We keep a focus on that because we recognise how important it is.

The other aspect concerns the innovation side. We have done a lot of good work there, although we have a bit more to do. That involves ensuring that Scottish businesses that come forward with innovative products, they can present them, and they can get a market for them in the public sector in Scotland, with £13 billion of procurement spend being leveraged in to the health sector, digital solutions and elsewhere.

The work of CivTech has been phenomenal, and we have significantly upscaled its capacity. CivTech is an international exemplar of how to do things and is leading a lot of international work and showing people how to do this stuff. It has done that primarily in the areas of digital and tech, but it is expanding its capability much more broadly.

SHIP, the Scottish health and industry partnership group, is exploring innovative solutions from Scottish businesses, normally SMEs, for how we give market opportunities in the NHS that are more flexible in their purchasing requirements and specifications, so that something that is innovative and does not exactly fit our purchasing requirements still has a route to market.

The supply chain development programmes are focused on where we have significant public sector spend, where we can build strong indigenous supply chains and how we put both of those together and make things happen. It is not a matter of flicking a switch and stuff just happening; there is a huge amount of detailed work involving different sectors, businesses and opportunities, navigating the rules and ensuring that we are focused on delivering what we can.

We are making progress, but there is, absolutely, more to do, and I am always delighted to talk to businesses that have innovative products and services to understand how, in working with them, we can give them a foothold in Scottish public sector procurement.

As you will be aware, there are international rules around this stuff, such as the WTO’s bidding rules in the GPA. We cannot just make things up. We have done as much as we can within those rules to move things forward. We made a huge commitment with the supply chain development statements to ensure that the bidders that came forward made it very clear how they would use supply chains, and, as I have said and as I am sure Colin Smyth is aware, we have pushed the scoring criteria to the limit with regard to what we are able to do within international rules.

We can put in place requirements as best we can within the rules that sustainability, net zero and carbon footprint aspects are factored in, and we look to do so where possible. Increasingly, that is an area of focus, because it encourages local production and innovation. The construction sector is a prime example of that. The Construction Scotland Innovation Centre had worked on putting forward innovative solutions to the net zero-carbon challenges, and we want to use the levers of public sector procurement to facilitate such solutions as best we can.

Absolutely. That will happen as soon as we can do it. There are two partners involved. We have been keen to make progress on that for more than a year—we are not the ones who are taking time to get our ducks in a row. We are waiting for our partner to finalise the things that they need to finalise internally. As you will understand, they are slightly distracted by other matters at the moment.

Lots of bits of that need to be joined up. You will have heard from witnesses in some of your previous sessions that this is a moving target. It is notoriously difficult to predict skills shortages years in advance. We need closer alignment between the skills system and businesses.

The approach must be about having the right mix of practical skills that we know will be required and ensuring that young people go right through their whole careers with the ability to reskill and to understand the opportunities that are available and the support that they can get. As I said, we are spending more than £1 billion to support the skills system and an extra £500 million on top of that over the course of the session of Parliament to focus on that issue. I talk to businesses every day and skills is the number 1 issue, notwithstanding everything else that is going on.

We are hugely seized of the need to focus on that. As I said, it is about ensuring that the skills system is increasingly aligned with the needs of business. We have those clear routes of communication so that we can ensure that there is an understanding of what is required, but as I said, the system also needs to be very agile, because it is aiming at a moving target.

Absolutely. We are already seeing that. There are examples—I will not go into the details for reasons of commercial confidentiality—in which our legal teams have had to have a good look to understand whether we are able to move forward. They take, as they often do, a very safe view on what is and is not allowed. In the absence of the pre-authorisation process that existed previously, there is an inclination to operate on the side of safety, which means that we have to take a different view on things that we might have done in the past. That is obviously concerning.

We have made that point repeatedly at every opportunity, as I said earlier. There have already been situations relating to support for investment in which there has not been the clarity that there has been previously. The view of lawyers is to be safe rather than to move things forward, so we have had to have discussions in that context, which is concerning because it leads to delays in the processes. As you said, it has a chilling effect and slows things up. In some cases, it might prevent things from happening that otherwise would have happened, because we do not have clarity in advance on what is and is not permissible. Taking a safety-first approach could lead to advice being given that we should not go ahead with something, which is a concern.

As I said, that issue and many others, including the issue relating to the bank, have been raised repeatedly with the UK Government at official level and at ministerial level.

It has had consultations at a general level but I am not aware if it will do consultation on the guidelines—Hilary Pearce might know that. You are right to say that we are waiting to see what it will come forward with. The streamlined area is an example of one where the secretary of state has powers that the devolved ministers do not have. That is concerning because, if there was any debate about what the streamlined powers allow or do not allow or how they operate and when they would operate, the decision would be up to the secretary of state and, even if the issue involved a devolved matter in Scotland, we would not have any ability to act in the same way.