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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.

It is hugely concerning or, at least, unhelpful that we have those additional constraints. As you heard from wholesalers and retailers, they have worked hard to mitigate them and keep the shelves fully stocked. The sector and industry have absolutely done what they can to keep products flowing. We have worked with them on HGV driver issues and other matters to help support that.

There is a longer-term resilience issue and there is more that we can do to grow more food in Scotland to support that. Scotland is a world leader in technology such as vertical farming and exporting it at scale. That is an area of opportunity for us.

We are focused on joining all that up to build more resilience in the Scottish supply chain.

On the question whether there has been a shift towards more of this stuff happening with larger contractors, I do not have the evidence to hand to confirm whether that is accurate. However, if you look over the whole piece, you will see that, as I said earlier, the proportion of contracts going to SMEs in Scotland is far in excess of what it is in the rest of the UK or, indeed, the European targets in that respect, and SMEs get a higher percentage of their work through public sector procurement than larger businesses. That is the reality of the situation with regard to the numbers; from memory, I think that the figure is 46.5 or 47 per cent.

There will always be anecdotal stuff about this or that happening with a particular contract, and I am always keen to hear about those specific examples, because it helps to inform the overall picture. However, it is clear from the data that we in Scotland do much more of our procurement through SMEs than elsewhere, and that is increasingly the case.

The requirements that are in place ensure that purchasing is not done on price alone. A range of other factors such as local benefits, equality and sustainability is factored in. We can debate whether the balance is right, but this is not a black and white issue. Those factors are already in play and are part of the criteria.

As for the size of the contracts, we are, as I have said, looking for every opportunity to break the lots into smaller buckets to allow smaller businesses to bid for them. That is what we have been and are doing proactively. Sustainable procurement legislation is in place and has been for a number of years, and the annual report that comes out is very transparent about what we are doing, how we are doing it, whom we are working with and what is happening right across the public sector on this. The data are moving in the right direction, given the proportion of SMEs that are winning those contracts.

We have the intent, the actions and the results. Is there more that we can do? Absolutely. Are there anecdotal examples of things that can be improved? Yes, and there always will be. However, we are keen to address all that so that we continue to move in the right direction.

The pipeline aspect is hugely important in construction, and the sector has made great progress with it. I chair the construction leadership forum, and it has been a huge area of focus there. The Scottish Futures Trust has also been working hard on the matter with the Government. We have the pipeline in place that allows public sector organisations to put their future plans for construction work on the pipeline tool, and everybody can have a look to see what is coming up.

Stability of demand is very important in the construction sector. It allows contractors to know what work is there and plan accordingly, which means that the whole sector is not being moved from feast to famine, year on year, in terms of the work. The tool has come online in the past few months. It has been really effective and is making a huge difference. We are also working with leadership groups in other industries, which are looking at and learning from what the construction sector has done in order to do something similar. That is a great example of the initiatives that are being taken.

Was your other point around sustainability?

You have characterised the situation very well. On the timescales, HS2 is only just getting started, so it is not impacting things today, but does it have an impact on strategic thinking for the future? Yes, of course it does. High-speed rail is hugely important, and there are international examples where it is well embedded in transport infrastructure. Yes, we should be in a position to exploit and develop it more.

Speed is an issue, but capacity is probably more of an issue. The line was going to help in that regard. If it was going to be done seriously, the work would have started from both ends at once. It would have started from Scotland and London and met in the middle. Clearly, however, that is not what it is all about; it is about getting commuters into London, rather than considering the whole country.

That is an issue, but it is more of a long-term issue, which affects strategic thinking. In the immediate term, there are other things that we can do and that we are doing to address the issue.

Much of that will come down to the specific opportunities that present themselves. I am not closely involved in the discussions with transport colleagues who are working across this, but where opportunities present themselves we will look at where railhead facilities can be developed to allow more products to go on to rail, rather than road. Much of that will be where there are volume products and there are specific opportunities to take X hundred trucks off the road by facilitating a rail connection or something. That work is on-going.

I am directly involved in a piece of work that directly supports that on direct port shipments from Scotland. I have convened a group of port operators, airports and others to understand what volume of traffic leaves Scotland by truck for ports in the south of England and how we can address opportunities to get more of that on ships leaving Scottish ports. There are commercial realities there and it is about understanding those and what other things we can do to move the locus of calculation to make it easier for people to use Scottish ports. I hope that that work will yield some significant results.

I am from a manufacturing background, so it is something on which I am hugely focused. We have done a lot of work off the back of the success of PPE manufacturing—it was great to hear that work being referenced several times in your earlier evidence sessions—to formalise the process and see where else we can apply it.

There are two parts to the issue, the first of which is procurement. I have responsibility for procurement, and the Scottish Government is reaching out across the whole of that £13 billion spend to public sector bodies, including local government, Transport Scotland and the NHS, to stress its importance. The SHIP work in the health service is a key part of that, and, increasingly, it is drawing through opportunities.

The other side of the issue is the enterprise agencies. They are hugely seized of and focused on the importance of the supply chain, and are working hard on it. The agencies were a critical part of the work that we did on PPE.

It is about joining everything up. For example, we might see that, although the public sector is spending £100 million on specific commodities or in a particular sector, most of that money is going abroad. We need to look at which businesses in Scotland might be capable of stepping in to meet those needs, and what they need to allow them to bid for a contract.

Is it to do with having the right skills and qualifications or the right standards in place? Is it a question of capacity or investment in equipment or premises? Is it logistics? Which factors are preventing a Scottish company from bidding? The enterprise agencies and Skills Development Scotland can then wheel in and say, “We can help you with this or that.” It is about getting suppliers—not just one supplier, but a series of them in a sector—to a place in which they can bid for those contracts, and creating the capacity and capability to bid for those contracts.

It is important that we join all that up in an intelligent way, and in order to do that, we have to drill down to understand where we are trying to operate. We currently have in train programmes for PPE, and we are looking at reshoring our generic medicines manufacturing. We also have programmes for heat pump manufacture; there are a couple of opportunities in that regard in Scotland, but we need more. A lot of that also involves looking at the sub-suppliers who supply the heat pump manufacturers in Scotland. How do we get more of that content in Scotland? We are also looking at electrolysers for hydrogen, which will be a huge area in the future.

As I mentioned earlier, we are looking at timber frame construction, from forestry all the way through sawmills to manufacturing facilities and construction sites in Scotland. Along with the construction sector, we are also looking at how much of that will involve off-site manufacture and modular build.

We are currently running about seven or eight programmes, and on top of that we have all the ScotWind stuff. I should clarify that the contract for ScotWind requires that, if the developer does not follow through on the supply chain development plans and use local content, there are penalties as a consequence. Contrary to what was suggested earlier, that provision has teeth.

I can talk about the subject for hours because I am passionate about it—it is hugely important and there is a huge amount going on. However, I will stop there, given the time.

There is green cement—there you go. It can be done, but it involves huge capital investment in the plant. We are talking to Scotland’s only cement manufacturing plant about its plans in that regard. Green cement is very much on the radar, and it is part of the mix in construction. As I said, timber—for example, products such as MASSLAM timber solutions that can, structurally, do the job of cement—will be an important part of that.

Our approach involves looking at a whole range of different aspects. The Construction Scotland Innovation Centre in Blantyre is doing a super job in leading on that stuff, with input from Heriot-Watt University and others. It is a key strand in the Scottish construction leadership forum, so we are absolutely on that.

As I said, significant private sector investment will be required to deliver on that, but the sector understands that that is the direction of travel. We want to make it as easy as possible for people to decide to invest in green cement, for example, in Scotland as opposed to elsewhere.

Food supply is another great example. Again, a lot of different things are happening there. In conversations with local authority purchasing departments and others, it often comes down to the fact that, while there is a keenness to buy locally, the capacity is not in place to do so, because of the volumes that we are talking about. As I said, we need to get local suppliers to a position where they are able to supply at scale to meet the procurement requirements. We are doing a lot of work to join all that up as best we can.

The food miles part of that is an important criterion, so we need to think about how we address that and factor it into the procurement decisions. Also, there are moves afoot internationally on carbon accounting and other measures at EU level and elsewhere. We need to take those factors into account but, again, that will impact on the cement discussion that we just had.

A lot of things are happening internationally and we are moving forward to take advantage of them. I know that the committee took evidence from the food and drink sector, and I have officials following up on some of the examples that those witnesses gave of difficulties in accessing procurement for various reasons to determine how we learn from those examples and make our processes more effective at delivering what we all want.

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 restrictions are another barrier. They make life difficult and they make business difficult. They make harder things that should not be that hard. They make things uncertain, as well, because of all the paperwork requirements. All kinds of clearances are required, and there are various rules and regulations that just put red tape in the way of businesses. The situation is hugely unhelpful. It clogs up supply chains and eats away at the agility of businesses and their capacity to respond as they should.

As you said, the increased restrictions have just come in, so it is too early to say what their specific impact has been. That is another example of the UK Government placing ideology above the needs of business.