Keith Brown on the risks and opportunities brought by Brexit

Keith Brown - credit: Nick Grigg

Like a lot of people, Keith Brown didn’t get much sleep on the night of 23 June 2016. He had been at an EY event on entrepreneurs on the day of the vote – no one there was expecting a Leave result, he says – then went home to turn on the TV and watch, along with much of the rest of the UK, as the results of the referendum on the UK’s membership of the EU started to come in.

By early morning the outcome was clear. The UK had voted by 52 per cent to Leave, with 62 per cent in Scotland coming out in favour of Remain. At 5.45 he went to bed. At 6.15 he got a call from Bute House, requesting his presence, as the First Minister started laying out her response to the vote.

When Brown took over as Cabinet Secretary for Economy, Jobs and Fair Work back in May, the polls, along with most commentary, still pointed to a comfortable victory for Remain. Those predictions, it transpired, were completely wrong, and the result has dominated the UK and Scottish Government’s agenda ever since.

RELATED CONTENT

Analysis: The Brexit waiting game

In full: Theresa May's speech on Brexit

Sketch: Meet Jeremy Corbyn mark 2

So how has it affected Brown’s role? And, given the economic uncertainty brought by the result, with businesses deeply concerned over the effect it could have, is it fair to say he has now landed the toughest job in the Scottish Government?

“Derek Mackay might challenge me on that, I suppose,” Brown says. “You are right in that when I got the job, it was the first time we had a distinct post for the economy – before that it was wrapped up in John Swinney’s portfolio – and I probably didn’t appreciate how tough it would be in its own right. I am only just coming to the end of the first cycle of engagement with stakeholders, and that has taken substantially longer than it did in previous portfolios I have been engaged in, and then the economy and skills review was a big first task.”

The EU vote, he says, “changed the nature of the job”. Within hours of the result, Nicola Sturgeon spoke to Mark Carney, Governor of the Bank of England, while Brown set about opening a dialogue with Scotland’s major financial institutions.

“There were things we were trying to do to boost the economy, and we were then presented with this additional challenge, and this additional uncertainty, so it has made it substantially more of a task than it was in the first place. That first weekend, many of the financial institutions I spoke to said they thought it would be six months in before it hit, and I think they have proven to be pretty accurate.

“The stock market tends to be quick to react to these things, but the effect it would have on companies and jobs takes a bit longer, and that is how it transpired. It has made the job more urgent. It was urgent enough anyway, trying to boost the economy to get us into the top quarter of the OECD, but this presented additional challenges.”

And so now, six months on, with Theresa May still clinging to her stock response that “Brexit means Brexit”, part of his concern presumably stems from uncertainty – Brown said it took six months for the effects to hit – but no one can be completely sure what will happen. So how can the Scottish Government try and increase confidence in the economy?

“Well, one was a capital boost. The nature of a capital injection, as the OBR said, is it is probably one of the most effective ways to boost and sustain the economy because you are employing lots of people with the work you do. Capital projects, by their nature, tend to be labour intensive, so providing that level of certainty to people, that their jobs are going to be there is important and that employment is going to be sustained.”

He adds: “It was about providing as much reassurance as we could, and that was borne out by a clear statement within a few hours from Bute House. I was there when the First Minister held her conference and answered those questions, and I think she in particular, along with the rest of the government, provided that leadership; that we understood the situation and that we would produce a plan to get through it.

“That reassurance was important, not just for individuals and the economy, but also for companies, because one of the biggest concerns was investment profiles and whether investment was deferred or cancelled.”

And what about coordination with the Treasury and the UK Government to come up with a concerted response? How has that been going?

“I think it is fair to say it has been patchy. I went down to see the then Chief Secretary to the Treasury before the reshuffle following David Cameron’s resignation. It was a relatively good discussion, on things like loan infrastructure guarantees for the North Sea, which was really important given the down-turn in price, and some representations and dialogue have been effective. I had a relatively constructive meeting with Liam Fox to say we are intending to push much harder in terms of trade promotion, like in doubling the number of SDI staff, and I also wanted to say we wanted to work with the UK Government in terms of the embassy and trade activities they have been doing. We had a good response to the loan infrastructure guarantee, we are still seeing the fruits of that, but other things, less so.”

Brown runs through some of the advantages Scotland holds in attracting foreign companies to come and establish themselves here. But are there also possible opportunities from Brexit? Could Scotland also benefit? The Scottish Government’s plan calls for the whole of the UK to stay in the single market, but assuming that does not happen, and Theresa May pulls the UK out, if Scotland could retain single market membership, what opportunities could that bring?

“Huge. Our preference is for the whole of the UK to stay in, but if it doesn’t, then we believe our proposal to stay within the European Economic Area will benefit the whole of the UK. Even if it is only Scotland that stays in, it will help increase access to the European market for the rest of the UK as well. But Scotland would become, as we are just now, an English-speaking part of the EU, which many companies around the world are very keen to tap into. It would be very attractive, I think, to investors in Scotland. But also, it would give more certainty to companies in Scotland about being able to access that market with no tariffs and no barriers, as they do currently. So I think it would be to Scotland’s substantial advantage if we had that outcome.”

Is there not a danger that if jobs moved to Scotland as a result of the arrangement, it could lead to some cross-border tension? Is that a concern?

Brown does not seem overly troubled by the idea. “We always want jobs to move to Scotland, but I think the report and some analysis bears out that there would be a boost for England and the rest of the UK from having that continued access.”

But wouldn’t companies move? From London to Scotland, for example?

“Well, we are always interested in companies moving to Scotland. In relation to London, I think the biggest challenge is that some large financial institutions are now looking at whether they will invest in London because the EU itself, compared with some Asian markets and others, is not as prominent as it once was. That is a bigger danger to London than Scotland. But we have, of course, upped our activity in London. We have upped our activity in Dublin, with the establishment of a hub, and the same in Berlin. So we are trying to attract jobs wherever we can, and I don’t think there is any reason why the rest of the UK, not just Scotland, should not be able to benefit from jobs that London attracts in the first place. It is true in terms of investment as well, much of the investment in Scotland and the rest of the UK comes first through London, and I think that is perfectly legitimate and reasonable in the interests of a more balanced economy generally. But my job is to promote Scotland, and we will do that wherever we can.”

The scale of the task facing Brown on the economic front certainly looks formidable, with a recent report from the Fraser of Allander Institute forecasting that Brexit could see Scotland lose between 30,000 and 80,000 jobs, even if the outline of the UK’s future relationship with the EU still looks extremely sketchy. But this is just one area of Brown’s portfolio, with the economy sitting alongside a demand to create better jobs – rather than just more of them – and with Brown tasked with attempting to drive forward the Scottish Government’s fair work agenda.

Yet recent figures show 467,000 Scots are on less than the living wage, up from 395,000 in 2013 – an increase of 18 per cent. What drove that rise in those being paid less than the amount needed to live?

Brown insists that it is important to look at the context behind the figures. “There are more people working in Scotland now but we still have, of all the UK nations, the highest percentage of our employees on the living wage. Just fractionally under 80 per cent; 20 per cent of all companies in the UK that are signed up to the living wage are based in Scotland. We are doing quite a lot to increase that number.

“We think it is morally right that people are paid a wage they can live on, and secondly, there is a benefit to the economy. If you pay someone the living wage they are not salting it away in a bank account, they are using it to live on – by definition, virtually. That means there is more money in the economy, more money to spend on jobs and services, and it is in the interests of companies to pay it. I would like to see more done to present Scotland as a living wage country and we are making good progress, we are top of the UK just now, though there is more to do.”

So what drove the fall in the number of people on the living wage?

“We have seen the economic situation change over time and of course, if you are going to have pressure on growth, which is partly accounted for by Brexit, you have seen that fall off in confidence, plus margins for companies have been tighter for some time, still coming out of recession previously. But it is also the case that we have grown the workforce, so the numbers, proportionally, would have increased if it stayed at the same percentage.”

Still, with employment reserved to Westminster, it seems as though the Scottish Government has limited power in pushing companies towards the living wage. It can offer carrots, but it has no stick with which to force compliance. So to what extent is this actually within the Scottish Government’s control? After all, it is a private sector decision, what can the Government actually do?

Brown nods. “It is mainly about encouragement and demonstrating, as well as we are able, to companies that it is in their interests to do it, which may not be immediately apparent. There is a very good example in Dundee where the council asked a hotel that was coming to the waterfront to pay the living wage, and the hotel said no, ‘it would put us at a competitive disadvantage’. Dundee council said it would not, because everyone in that area is paying the living wage already, and they said they still thought they would lose out if they paid the living wage, and so the council said they would recompense them for any loss they could demonstrate from paying the living wage over the course of the year, and of course, they couldn’t. So it is about making that case, and of course, we cannot enforce it, even in procurement for government contracts we can’t make it a condition, but if you look at the Abellio contract, not only was everyone there guaranteed a living wage, but all the downstream suppliers – catering and cleaning staff too, so it is about encouragement just now.”

Many of the concerns over the speed of progress towards a fair work agenda in Scotland seemed to be summed up by media reports from just before Christmas on the treatment of Amazon workers in Fife. Shocking reports suggested workers had been pushed to sleep in tents in an effort to hold down a job at Amazon’s fulfilment centre in Dunfermline.

The issue was discussed in parliament, with Brown stating his intention to meet with the company to discuss the need to improve working conditions. How has he gone about doing that and what communication has he had with Amazon?

“At the meeting, I raised first of all, the press reports, in terms of the tents but also some of the commentary around how the staff were treated and the work ethic there. They were very keen to ensure that people’s interests are looked after. Now I am not going to pretend that by talking to the management as I did – though I did also speak to individual employees away from the management team – that that necessarily gives me a full picture, but I was substantially reassured by some of the measures they have in place, in terms of employee participation, and employee activity – the ability of employees to make representations to the management. But I made three requests of them – one was that they look at the living wage seriously, making the same arguments I made to you. They also talked about some of the other benefits they have – like pensions and shares. They said they should be taken as a package, to which I responded that this is about the living wage, and people having enough to live on. They also pointed out they pay the National Living Wage, which is a legal requirement.

“We have a Fair Work Convention and I asked them to consider being involved in that, possibly making a presentation and also a Q&A, because I was able to ask questions but it would be good for other people with an interest to do that and they said they would consider it.

“The third point was around trade union activity and the organisation of trade unions in the workplace, and I asked them to think about that. They gave me assurances they would consider that and I will go back to them in the New Year to see how we can get things done.”

With Roseanna Cunningham, Brown’s predecessor in the fair work brief, having had similar meetings with Amazon in the past, opposition parties seemed unconvinced by Brown’s response. As Willie Rennie put it following a debate in Parliament: “The Scottish Government is having zero impact. Tea and biscuits failed last time. We are only going to see a shuttle bus develop between Parliament and Amazon so more meetings can happen.”

So has the Scottish Government been too cosy with large multinational corporations in the past?

“I take that with a pinch of salt. First of all, the Lib Dem-Labour administration gave RSA to Amazon back in 2005-2006. The Lib Dems argued against the Scottish Government having employment powers through the Smith Commission. Plus, the Lib Dems were in government with the Tories for five years and didn’t change the living wage to the standard we expect – independently arrived at £8.45 for the coming year. They have had all these opportunities and it seems a bit rich for Willie Rennie to be saying that.

“I can also tell you, both in terms of emails I have received, staff I have spoken to and also from Willie Rennie’s own Facebook site, [they] are filled up with people who are very angry with the assertion that these jobs are not worth having, essentially. I forget the exact terminology he used but that Fife would be better off without them – that was in a University of Dundee event just before the election. So there’s a lot of anger, this is 4,500 jobs for the Fife economy, it will reduce substantially after the Christmas period, but it will be at least 1800 permanent employees. These are important jobs, people want these jobs, and my job, and I said this in the parliament, is economy, jobs and fair work – to look after the economy, to try and get as many jobs as we can, and in the fair work thing, to either have companies agree to that or to work with them.

“The Living Wage Foundation don’t only talk to companies when they have agreed to pay the living wage, they encourage them to go through a process to get to that. I think that is the right approach. Getting the jobs and making sure as best we can – without the powers, that Willie Rennie’s party denied us – to get as much fair work as we can.”

This could be a tension, post-Brexit. The Scottish Government is going to do everything it can to attract companies to Scotland, while also trying to restrain a natural impulse, driven by the free market, to lower conditions. 

“If you can get to the stage when the bulk of companies are paying the living wage then that fear that there might be in terms of competitiveness starts to reduce. If we can get to the stage that we can justifiably call ourselves a fair work nation, then I think companies will be less and less disinclined to pay that living wage. You know, Amazon have employees, who if they had another pound an hour in their pocket, would spend a proportion of it with Amazon, so Amazon would benefit as well.

“Incidentally, that Amazon distribution warehouse services the whole of Europe, it is a massive operation – we want these jobs, but we want them to be fair work jobs, and that takes a bit of work.”

It is well known that Brown served in the Marines at a young age, and only joined the SNP after leaving in 1983 and then going to college. He ended up in the party after visiting a Freshers’ Fair and speaking to the different party representatives – it was always going to be a choice between Labour and the SNP, apparently. He had already campaigned for a Scottish Assembly, and when asked what pushed him to the SNP, rather than Labour, he says: “I was just more convinced by what they would do for Scotland, I suppose.”

Certainly at school, he says, he had no real interest in politics, though he did try to vote in the 1979 referendum.

“I was too young – 17 – but my mum couldn’t vote and I asked if I could use her polling card, without realising it was illegal. She told me I couldn’t and I didn’t do it. But I don’t remember any other interest. During my time in the Marines I was quite interested in journalism, believe it or not, and also in current affairs. So I made up my mind to study political science and then joined the campaign for a Scottish Assembly. But I can’t remember having an interest in politics at a young age, to be honest with you.”

His family, he says, were not at all political, though they are now, in the aftermath of the 2014 independence campaign. Neither is there any military history in his family. In both cases, he was the first to make the move. So why did he join the Marines?

“This sounds terrible – people ask me that quite a lot – but I wanted to get fit, as simple as that. In Edinburgh at the start of the Thatcher era, in 1980, jobs were not in big supply, so I thought I would join the military and get fit. I went to each of the recruiting offices. The first one I went to was the navy on Lothian Road and I saw a poster for the Marines, which seemed like a combination between the army and the navy, so I thought I would have a bash at it.”

At that time, there would have been no prospect of a war starting.

“No, no. There was always the prospect of serving in Northern Ireland, which I never did, but no, you didn’t anticipate a war. In fact, we were told on April the 1st it was a joke, when it was broadcast that we were going to have to go down to the Falklands.”

And how did the Marines affect his world view? Surely being sent around the world at such a young age would change the way you look at things?

“I was 17, maybe 18, when I joined. It was an intense experience. The Marines training is an intense experience anyway, but then to be involved in a brief war, I think, also changes you. I am sure it changes you in all sorts of ways, some of them not obvious. It helped me grow up, I have no doubt about that, but I can’t point to any one thing that radicalised or politicised me. I was only in for three years but I enjoyed the time I had. I liked playing football, which I did a lot of, and skiing and other sports. I don’t regret it, it was a good experience.”

As well as his Cabinet Secretary portfolio, Brown is also Veterans Minister, with media attention, perhaps understandably, drawn to his military history. Does he ever get tired of people asking about it?

“Oddly, I don’t. A lot of veterans do – they don’t like to talk about their experience. For me, it has never been an issue, in fact, sometimes I can bore people to death with it. I don’t mind doing it, though I am not keen to make a big issue of it. I am neither ashamed of it, nor, luckily for me, have I been traumatised by it.”