Empowering Scotland's Island Communities

Enhancing islands wellbeing

Islands economic development

Scotland's Future sets out the Scottish Government's vision for an independent Scotland. Scotland's Future makes the case that by providing the ability to tailor all economic levers to Scotland's own circumstances, strengths and preferences independence would enable Scotland to raise economic growth levels to match those in comparable independent European countries, while also increasing equality and wellbeing across Scotland both individually and between different areas.

Scotland's Future also recognises "that our island communities have challenges and opportunities that differ from those in other parts of the country." Independence would offer greater scope for close and regular engagement between local and central government, therefore allowing economic development policy to be customised to best respond to challenges and support opportunities within the islands.

For example, the Scottish Government have committed to establishing a Fair Work Commission upon independence to advise the government on the minimum wage as well as factors relating to individual and collective rights which contribute to fairness at work and business competitiveness. In examining these issues the Commission will explore and advise on the specific circumstances and considerations facing our islands businesses.

In addition, the Islands Councils may use additional tools available as a result of independence to support sustainable economic growth and to boost wealth and job creation on our islands. This would be supported by the areas of empowerment and additional responsibility set out in this prospectus, along with the funding that could become available through both community benefit and the revenues from seabed leases.

Supporting current economic opportunities

The economies of the Outer Hebrides, Orkney and Shetland are all impacted by issues of geography, such as distance from main markets, costs of business, peripherality, sparseness of population and demographic imbalance. To explore their respective economic opportunities and priorities, the Minister for Energy, Enterprise and Tourism, accompanied by senior representatives of HIE and Skills Development Scotland ( SDS), visited each Islands Council in early 2014.

There are clear economic growth opportunities and success stories in all Scotland's islands. These include strengths in the energy sector, underpinned by a natural resource asset base in oil and gas and the emerging renewables sector, as well as sectors like food and drink, aquaculture, creative industries, tourism and life sciences. These strengths, combined with potential supply chain opportunities and the opportunity to improve island connectivity, will drive future sustainable economic growth on the islands.

Start-up and growing businesses are supported via Business Gateway services which are delivered through local authorities, while Highlands and Islands Enterprise ( HIE) support the development of businesses with the greatest growth potential as well as supporting the strengthening of communities. As the Scottish Government's economic and community development agency for the whole of the Highlands and Islands, HIE plays a strategic role across the region and is of a sufficient scale to share expertise and pool resources to meet the needs of local areas.

In particular HIE's sectoral expertise and its role as a stakeholder in Scottish Development International ( SDI) gives local area teams access to high calibre sectoral specialists and knowledge of international markets which help inform local development priorities within a context of regional, national and global opportunities and challenges. HIE also provides access to support programmes in areas such as entrepreneurship, leadership and innovation and has in place a specialist advice service which is tailored to the needs of businesses from right across the region.

Under current arrangements, superfast broadband provision in the Highlands and Islands should reach 84 per cent of the region's households by the end of 2016, underpinning business performance and community growth. HIE also has particular resource and expertise in areas such as European policy, State aid rules, transport, research and economic analysis which can be deployed to inform and support local area teams and partners in dealing with issues and challenges as they emerge.

In addition to accessing these pan-Highlands and Islands services, which 13 staff based in Orkney, Shetland and Outer Hebrides help deliver, there are 29 staff employed in area-based teams across the three Island Areas. Through these area teams HIE provide account management support to 82 businesses, 39 social enterprises and 15 communities across these islands.

This engagement is helping deliver economic growth on the islands at present while ensuring that the Scottish Government, through HIE, and Councils are well positioned to take full advantage of the economic and employability levers which independence would make available.

Developing island innovation

Utilising existing powers the Scottish Government has established four Enterprise Areas comprising 15 strategic sites, including Arnish in the Western Isles as well as Hatston and Lyness in Orkney. Enterprise Areas are locations with clear opportunities and offer a package of support to encourage early investment, boost growth and stimulate job creation.

Progress has been made at these sites since their designation in April 2012. However, the scale of development and job creation has been constrained by the delays in upgrading grid connections to the islands. To enable these locations to fully benefit from Enterprise Area status, and to maximise the renewables opportunities presented by their natural resource asset base, the Scottish Government will extend the timeframe for Enterprise Areas at Hatston, Lyness and Arnish by three years to 2020.

Alongside this the Scottish Government supports the establishment, by Councils, of local Island Innovation Zones ( IIZ) to provide a clear focus on the specific opportunities available in each Island Area and to enable all key partners to coordinate and tailor their support to best meet the needs of the local businesses with greatest potential for expanding.

The Scottish Government supports the establishment, by Councils, of local Island Innovation Zones ( IIZ).

An IIZ could provide a brand around which to focus promotional messages, articulating the economic growth opportunities available to potential investors and indigenous businesses. As the specific opportunities and business base, including supply chain potential, differ across the island communities, IIZs would be for islands to develop and take forward working with partners, to identify and secure the most appropriate and tailored local support. This could include streamlined planning commitments, bespoke skills development support, targeted business rates relief (utilising powers proposed in the Community Empowerment Bill) as well as other measures appropriate to local circumstances. The Scottish Government and its agencies will engage with the islands as they develop their IIZs, including in the context of the Scotland CAN DO programme, which seeks to support a range of activities promoting a more innovative and entrepreneurial Scotland.

A Scottish Government with the powers of independence could consider what further support it could offer an IIZ subject to the proposals from Islands Councils.

The Scottish Government also encourages the Islands Councils, working in collaboration with HIE and SDS, to further deepen their engagement with private businesses on the islands to ensure support is tailored to meet the needs of the local business communities. Where significant international companies are major employers, and can act as anchors around which to build local economic resilience and embed supply chain links, the Scottish Government will work with the Islands Councils to engage the appropriate decision-makers within these businesses and encourage them to explore how their activities can most effectively benefit local residents and support the development of sustainable communities.

Taxation

Independence would mean that all taxes in Scotland would be set by the Scottish Parliament in line with the needs of the people of Scotland.

Decisions about what specific taxes to apply in an independent Scotland, and at what level, would be taken by the Scottish Parliament and Government of the day.

Scotland's Future sets out the Scottish Government's approach to taxation including early priorities such as action on Air Passenger Duty, Corporation Tax and the abolition of the Married Couples Tax Allowance.

With independence the proximity of Scotland's islands to those making the decisions on taxation and the greater accountability of the Scottish Parliament will enable communities and organisations to make representations for changes to taxation.

As set out in Scotland's Future, this Scottish Government plans a simple and transparent tax system after independence designed to minimise the opportunities for tax avoidance. Over the course of the first independent parliament, the Scottish Government and Revenue Scotland will work together to simplify the tax system to reduce compliance costs, streamline reliefs and help to reduce tax avoidance, with a target revenue gain of £٢٥٠ million a year by the end of the first term. In particular, this Government will task Revenue Scotland to reduce compliance costs for small and medium sized businesses that generate valuable employment.

The Scottish Government would intend to invite representatives of island communities to contribute to a programme of work to review the inherited UK tax system following independence and to begin to reform the inherited tax system in order to realise the full benefits of a modern and efficient tax system. This will provide an opportunity to ensure that we are building a tax system which meets the needs of the whole of Scotland, including our island communities.

Business rates

Supporting businesses to flourish is a key part of promoting resilient communities and sustainable places in our islands. One of the ways of delivering that support is through the tax regime, specifically through the use of business rates.

There is a wide range of business rate relief schemes set nationally, which benefit small businesses or those in particular sectors or geographic areas. For example, in 2013, 2,800 premises on Orkney, Shetland and the Western Isles have benefitted from the Scottish Government's Small Business Bonus Scheme, paying zero or reduced business rates. This gave them the opportunity to invest those funds instead into maintaining and expanding their business or creating new jobs.

The Scottish Government believes that Councils should have further flexibility to incentivise business or to support key industries in their areas and that this power will be of particular value to the Islands Councils. As part of the Community Empowerment (Scotland) Bill the Scottish Government is introducing a new power to allow Councils to create localised relief schemes.

There are legitimate concerns on Scotland's islands about the costs faced by construction and engineering firms who have much to contribute to the local economy. Once the Bill is passed, it will be possible for local authorities to choose to offer additional rates relief to such firms, or to other sectors at their discretion, helping local business to boost job creation and to build sustainable island economies. It would be open to Councils with islands to consider whether they wish to apply local reliefs specifically on their islands only.

Community ownership

Community ownership or control of land or buildings can help make island communities more attractive to live in, supporting economic regeneration and sustainable development. The community right to buy, introduced by the Land Reform (Scotland) Act 2003 came into effect in June 2004. The Community Empowerment (Scotland) Bill will amend this right, and provide a framework for community bodies representing communities across Scotland to purchase abandoned or neglected land without a willing seller, in order to further the achievement of sustainable development of land. It will also make it easier for communities to define their "community" in a greater variety of ways, not just by postcode, but for example as the community of a particular island or group of islands.

The public sector also owns a range of land and buildings that community bodies may feel they can make better use of. The Bill will introduce a right for community bodies to request to purchase, lease, manage or use public sector assets. The body which owns the asset will have to assess the benefits of the community body's proposals against the current use, and there will be a presumption that transfer will be agreed, unless there are clear reasons against it.

Skills

Developing a local skills base to meet the need of both residents and businesses is of the utmost importance to Scotland's islands and a necessity for economic growth. Companies of all sizes active on the islands have a crucial role to play in upskilling in line with industry needs, including through apprenticeships under the Modern Apprenticeship Programme.

To support and enable this activity the Scottish Government, through Skills Development Scotland ( SDS), is committed to developing evidence and understanding of our islands' strategic workforce skills requirements. SDS has a team of dedicated staff located throughout Scotland, including local bases in the Western Isles, Orkney and Shetland. These teams will continue to support the development of appropriate skills, education and apprenticeship provision suitable for the unique circumstances in each of the Island Areas, including through the development of sectoral Skills Investment Plans ( SIPs) and Regional Skills Assessments. SDS has also committed to engage with Community Planning Partnerships covering Island Areas to progress activity resulting from the imminent Highlands and Islands SIP.

Other specific initiatives include the Scottish Government's active promotion of the Modern Apprenticeship Programme to employers across the islands. As of 2013 Quarter 3, SDS had supported almost 300 residents within the three Island Areas to start a Modern Apprenticeship ( MA) in 2013-14 ^[4] . In addition, over 150 Employability Fund starts had been supported across the three Island Areas in 2013-14. This Fund is administered by SDS, while services are developed and delivered at a local level to ensure they meet individual needs and complement existing locally-funded offers in helping islanders develop the skills needed to secure a job or progress to more advanced forms of training.

The Scottish Government will work together with island communities and partners to continue to develop relevant and purposeful further education, higher education, and skills training capacity on the islands which delivers training for vital local industries of national significance such as oil and gas, marine resources and renewable energy. This important work will continue in the context of local implementation of the Highlands and Islands SIP, and the Scottish Government's response to the recent Commission for Developing Scotland's Young Workforce (Wood Commission) Report.

Engineering and construction

The engineering and construction sector in the islands is characterised by small light-engineering, fabrication and manufacturing businesses, in addition to civil-engineering and construction contracting firms. The 2011 census found that the proportion of employment in the construction sector (11 per cent) was of greater importance to the islands when compared to the rest of Scotland (8 per cent).

The islands possess an abundance of natural resources which could be utilised to greater effect to attract investment to their respective areas. The islands could become global players in renewable energy generation and manufacturing - with supply chain activities identified as a key driver for developing the local economy. Further significant island participation in support and supply-chains including decommissioning is an opportunity. A key challenge is to address economic under-performance in the manufacturing sector - particularly given historically high levels of engineering training and skilled workforce. This may be through apprenticeships and training in the oil and gas sector.

The islands possess an abundance of natural resources which could be utilised to greater effect to attract investment to their respective areas

The Scottish Government and its agencies, Highlands and Islands Enterprise ( HIE) and Skills Development Scotland ( SDS), will work with the Islands Councils, including Business Gateway, to strengthen the capacity on the islands to form a valuable supply chain of engineering and construction companies operating on the islands. Actions will include:

• supporting sector-wide development to ensure a sustainable construction industry;
• supporting growth businesses in the engineering industry, in particular where they add value to the supply chain in other growth sectors such as energy;
• identifying skills needed in the engineering and construction industry and to support training;
• skills development to help people living on the islands maximise their employment prospects within the engineering and construction industry; and
• Scotland's Future sets out the economic and industrial policies that Scotland could follow on independence to boost productivity, innovation, research and development and encourage exports across Scotland's economy. The suite of economic measures proposed could all benefit the islands economies.

In taking forward these policies the Scottish Government will consider innovative ways to ensure Scotland's islands benefit from investment in economic growth.

Initiatives identified in Scotland's Future include:

• Developing a new industrial strategy for Scotland, including support for investment, strengthening the role of the Scottish Investment Bank, expanding skills development and expanding our manufacturing base, with a particular focus on maximising the manufacturing opportunities of our offshore energy potential.
• Boosting innovation through direct and indirect financing such as credit loans and guarantees and tax based incentives that are aimed at encouraging investment in innovation activities in research and development.
• Increasing participation in the workforce through transformational childcare, and an immigration system that best meets Scotland's needs.

Public procurement

It is essential that public sector procurement, worth around £10 billion annually, delivers the maximum possible public benefit to our economy and communities. The Scottish model of procurement seeks to maximise the contribution that public procurement can make to Scotland's economic prosperity. That approach views procurement as an integral part of the whole process of policy development and service delivery. The Procurement Reform (Scotland) Bill, passed by the Scottish Parliament in May 2014 will help us accelerate improvements in the procurement system and help tackle unnecessary inconsistencies for suppliers doing business with the public sector.

EU law does not allow discrimination in favour of businesses based in Scotland. Removing barriers to SME participation in public procurement markets could contribute significantly to Scotland's economic growth.

In the Western Isles the Comhairle has a policy to include community benefit clauses in all contracts unless there is reason why this would not be feasible. It is potentially the case that further community benefit can be 'squeezed' out of these contracts to secure better terms for local businesses in terms of sub-contracting and local employment - with guarantees that address youth employability issues with regard to direct employment opportunities and training/skills-development through vehicles such as formal apprenticeships. The Procurement Reform (Scotland) Bill will require that public bodies consider including community benefit clauses in all new major public sector contracts and where they are not appropriate, explain why in the contract notice.

The Scottish Government made representations to the European Commission over the reform of procurement legislation. The First Minister has made clear that the Scottish Government would use its position as an independent Member State to argue for changes to the EU approach to procurement. Taken together, the Procurement Reform (Scotland) Bill and the new EU Procurement Directives will put a sound statutory framework around the Scottish Model of Procurement, simplifying standardising and streamlining procedures for businesses and public bodies alike; and placing sustainable and socially responsible purchasing at the heart of the process.

The Scottish Government will continue to work with Scotland's islands on the implementation of the Procurement Reform (Scotland) Bill and the wider procurement framework during summer 2014, including on opportunities to enhance local business opportunities.

Planning

The Scottish Government is committed to a place-based approach to planning with a high level of local flexibility having already been achieved through planning reform. The National Planning Framework is the spatial expression of the Government Economic Strategy. It sets out our long-term strategy for growth and investment, envisaging Scotland as a successful, sustainable place; a low-carbon place; a natural, resilient place; and a connected place. The Scottish Planning Policy takes forward this vision and sets out how planning can lead to significant and positive change on the ground.

The National Planning Framework's vision for growth highlights the importance of the islands and coasts of Scotland for our future economy. Whilst cities are recognised as key drivers of the Scottish economy, equal recognition is given to the major opportunities for development arising in the three Island Areas, not least from marine renewable energy, but also from their wider economic strengths, world-class environmental quality and quality of life. In spatial terms, the NPF supports improved digital and transport connectivity, prioritises the infrastructure required to unlock the islands' renewable energy potential, and recognises key island towns as hubs for investment and services.

The Scottish Government has further demonstrated its commitment to the island perspective by undertaking systematic 'island-proofing' of the emerging Scottish Planning Policy ( SPP) - supported by the Islands Councils within a short-life working group on planning. This has led to, for the first time, explicit references to the specific issues for planning in the Island Areas within the SPP, and a tailoring of relevant policies to reflect local circumstances.

The Scottish Government will extend the life and scope of this working group beyond the SPP proofing work to allow us to work with the Islands Councils to explore key issues, such as the links between marine and terrestrial planning, in more detail. The scope of this work will be defined in collaboration with the islands' Heads of Planning. Rather than simply a forum for discussion, the Scottish Government is committed to identifying and taking forward workable solutions that will provide further flexibility in planning, more efficient resourcing, and a sharper focus on island-specific planning issues.

Transport

It is widely recognised that transport is an essential part of any and all economic activity. The associated assets and infrastructure, and the businesses and communities that use them, are all vital components of strong, vibrant and sustainable island economies.

The Scottish Government recognises the particular importance to the Islands Councils of local partnership in the decision-making arrangements for transport, and of fairly-priced and affordable travel both to/from and within the island groups. These two principles are central to our future actions.

Governance

Recognising the unique challenges of connectivity to our islands and the extent to which strong communities and local business rely on effective and fairly-priced transport links, particularly the vital importance of the lifeline ferry services from the mainland to the remote Island Areas, the Scottish Government will begin dialogue with island communities and other stakeholders to consider partnership governance arrangements.

These may entail strengthening existing arrangements, based on collaboration between Transport Scotland, regional transport partnerships and Councils, or creating an additional parallel body focused on island transport issues, for example, a twice-yearly islands transport forum. The Scottish Government is committed to governance arrangements that fully account for island-specific views, and will work with stakeholders to consider and ensure this on an ongoing basis.

Fares

The Scottish Government is committed to assessing the affordability of ferry travel to and from island communities, with the aim of bringing in fairer fares for islanders, tourists and businesses. The Road Equivalent Tariff ( RET) will soon be rolled out to all the remaining ferry routes in the Clyde and Hebrides Ferry Services network. This will offer passengers, cars, small commercial vehicles and coaches significant fare reductions on a further 14 ferry routes from the start of the 2015-16 winter timetable.

Recognising the different circumstances of the routes and fares to and from the Northern Isles, the Scottish Government will continue to engage with Orkney and Shetland Islands Councils to discuss the future arrangements for fares to and from the mainland. The Scottish Government is clear that RET arrangements would not always be beneficial on the Northern Isles ferry services, as the distances involved could mean increases across a range of ferry fares.

The Scottish Government stresses its commitment to fair fares for inter-island ferry services.

As part of their responsibilities to their communities, the Islands Councils are responsible for setting and agreeing fares for the inter-island ferry services that they provide. Where the Scottish Government are not responsible for the delivery of those lifeline routes, the Scottish Government will discuss the appropriate form and timing of any roll-out of RET with the Islands Councils. The Scottish Government stresses its commitment to fair fares for inter-island ferry services.

Scottish Ministers have actively pressed the European Commission over a number of years for greater flexibility in the maximum length of ferry contracts, previously limited to six years. Following this lobbying, the European Commission recently issued revised guidelines substantially supporting the position that the Scottish Government has taken on this issue. Such increased flexibility in the length of ferry contracts is particularly useful in future contracts where there is likely to be significant investment in vessels by operators. With independence and a stronger voice in Europe, the Scottish Government will be able to represent the concerns of our islands directly in all transport matters.

Air services

The Scottish Government invests around £30 million per annum to support air services to the Highlands and Islands. This comprises the cost of running HIAL airports, the Air Discount Scheme and the Public Service Obligation ( PSO) routes. The Scottish Government remains committed to the long-term provision of these facilities.

In particular, the Scottish Government is committed to maintaining the existing Air Discount Scheme so that residents of remote and island communities can continue to access discounted air travel. The Scottish Government notes the wish of the Islands Councils for the scheme to be extended to include certain types of business travel, and invites the Councils to produce a costed and legally compliant business case for consideration by the Scottish Government. As an independent EU Member State, Scotland would be better able to make direct representations to the EU in support of such a facility and in building on the current aid of a social character.

As part of our continued transport investment, the Scottish Government has begun the process of purchasing two new aircraft which will then be operated by the airline that secures the contract to provide the PSO routes between Glasgow and Campbeltown, Tiree and Barra. The Scottish Government will engage with island passengers, businesses and other community interests to consider what improvements can be made to those routes. The Government will also consider whether any economies of scale can be delivered by bundling Transport Scotland and local authority air routes into one package, and whether management of the contract should be undertaken at a more local level.

Inter-island ferries and fixed links

Inter-island ferries in some areas, particularly the Northern Isles, are provided by the local authorities and funded on a different basis from Calmac services. The Scottish Government understands the significant financial challenges that can fall on individual local authorities, and is committed to the principle of fair-funding in the provision of ferries and ferry infrastructure.

The Scottish Government recognises that the provision of transport services should not place a disproportionate financial burden on any Council such that it could be counter to the principles of Article 170, with particular reference to the revenue and ferry replacement costs of the internal ferry services of Orkney and Shetland, and commits to meaningful negotiation now to conclude this issue.

The Scottish Government also recognises the level of interest in some Island Areas in fixed links, welcomes proposals from the islands and commits to considering any such proposals, sharing relevant information and facilitating networks and learning with other countries such as Norway. The Scottish Government considers that with independence and EU membership, Scotland will be better able to access EU funding to support investment in infrastructure, such as fixed links, and will work with the islands as described elsewhere in this prospectus to maximise the potential benefits. In doing so, it will make use of the specialist European funding support which Transport Scotland is putting in place to help access opportunities for transport-related projects.

Fuel duty regulator

Scotland's Future recognises that the cost of fuel is a key cost to consumer and businesses. With independence, this Scottish Government plans to examine the benefits of a introducing a Fuel Duty Regulator mechanism to stabilise prices for business and consumers and how this could be made to work alongside our Scottish Energy Fund.

Digital connectivity

The Islands Councils are seeking a commitment to put in place a universal service in relation to broadband and mobile communication services; specifically:

• all properties in the islands should be able to access Next Generation Broadband at prices similar to that of the rest of the country; and
• mobile communication services should provide coverage and connectivity across the Islands.

The Scottish Government is committed to achieving the best possible digital connectivity in Scotland's remote and rural areas, including islands, whether through next generation broadband or mobile broadband services.

Next Generation Broadband

The significant investment being made in Next Generation Broadband ( NGB) infrastructure will extend access across the islands over the next two years, but the Scottish Government is working with HIE, Community Broadband Scotland ( CBS) and the Islands Councils to go even further. Work already underway includes supplier engagement as part of the Superfast Extension Programme, to understand what technology solutions could be deployed in future, as well as support for emerging community-based projects via CBS.

The Scottish Government calls on the Islands Councils, HIE and CBS to continue this collaboration with the aim of maximising the number of premises with broadband access in the three Island Areas. The Scottish Government stands ready to continue to support this process. A working group, drawn from islands representatives, Scottish Government, CBS and HIE, met in March to take stock of connectivity across the islands and a follow-up session is currently being arranged. This will provide the opportunity to discuss current and planned roll-out via the Digital Scotland Superfast Broadband ( DSSB) programme and options for those premises unlikely to have NGB delivered as part of this, whether through CBS or the Superfast Extension Programme.

The Scottish Government is pleased to note that CBS is already working with many island communities to support the development of projects. A key part of this is clarifying the eventual reach of the DSSB programme and identifying those postcodes that will not be served by upgraded infrastructure. Additional survey work is underway in Shetland to identify those premises and to therefore provide the certainty that communities need to bring projects forward.

A key underlying principle of this work is that best use is made of existing assets, such as the network owned by Shetland Telecom and any infrastructure delivered through the SWAN (Scotland Wide Area Network) programme. More widely, the Scottish Government is exploring how fibre infrastructure, currently used for non-telecoms purposes (such as controlling windfarms or monitoring electrical substations), could be used to provide backhaul for communities. CBS is in discussion with owners of this infrastructure to explore feasibility and overcome potential barriers.

The Scottish Government recognises the economic and social importance of broadband access to remote and rural communities across Scotland. Telecoms regulation is currently reserved and so earlier this year the Cabinet Secretary for Finance, Employment and Sustainable Growth, as Chair of the Convention of the Highlands and Islands, wrote to Ofcom to explore how a Universal Service Obligation ( USO) for broadband could be implemented. However, it is clear that the Westminster Government currently has no appetite to implement this.

In the absence of a broadband USO, the Scottish Government and its partners are investing over £280 million in the DSSB programme which will ensure that 85 per cent of premises can access fibre broadband by the end of 2015 and 95 per cent by the end of 2017. Without this intervention, coverage would only reach 66 per cent by 2017.

The significant investment being made in next generation broadband infrastructure will extend access across the islands over the next two years.

An independent Scotland would have the powers to use potential regulatory levers which could extend access to services. The Scottish Government's proposal is to create a single economic regulator which has responsibilities across a number of sectors including telecoms. It would be able to consider the case for introducing a broadband USO in detail. The Scottish Government believes that, alongside the significant infrastructure investment it is making, a USO has the potential to improve the provision of broadband to households and businesses in our rural communities. The Scottish Government will continue to engage with the Islands Councils on this issue.

Mobile coverage

The Scottish Government is also keen to support and facilitate ongoing engagement aimed at achieving improved mobile coverage on the islands.

Earlier this year, the Cabinet Secretary for Finance, Employment and Sustainable Growth wrote to Ed Vaizey, Department for Culture, Media and Sport ( DCMS) Minister, on behalf of the Our Islands Our Future group to reflect our shared concerns over progress of the Westminster Government's Mobile Infrastructure Project. As a result of Mr Swinney's letter, DCMS has agreed to meet with the Islands Councils, along with Arqiva who are delivering the project.

Looking ahead, the Scottish Government will continue to support the Islands Councils throughout the process of engagement with DCMS and Arqiva. The Scottish Government proposes to incorporate the Mobile Implementation Project ( MIP) engagement within a wider workshop on mobile connectivity, facilitating contact between representatives from Ofcom and Mobile Network Operators and the islands. Such an event would be an excellent forum for the islands to present their vision, for the industry to outline its roadmap for the region and to foster meaningful dialogue between all parties concerned on core issues such as regional roaming, rollout and coverage levels.

Through ongoing dialogue with mobile operators and Ofcom, the Scottish Government has further explored regional roaming. Whilst not technically impossible, the Scottish Government believes that regional roaming may be both technically and commercially difficult to achieve. Furthermore, the Scottish Government understands that regional roaming may deliver an unsatisfactory user experience. This is because roaming domestically would not operate the same as roaming abroad. The transition across operators' networks would not be seamless, leading to dropped calls and lapses in service. Regional roaming is opposed by all of the mobile operators and Ofcom, whilst continuing to investigate the issue, has no plans to mandate it.

Independence would also offer the Scottish Government and its proposed Single Regulator the flexibility to consider using specific coverage obligations for future spectrum releases and licences which acted to maximise rural mobile and broadband coverage, taking account of successful approaches adopted elsewhere in Europe.

Although Scotland currently lacks the regulatory/legislative powers over telecoms, the Scottish Government nevertheless continues to work with the Westminster Government, Ofcom and the principal operators to ensure the best outcomes for Scotland. In terms of coverage, the Scottish Government successfully lobbied Ofcom ahead of last year's 4G auction to ensure one licence carried a minimum of 95 per cent coverage of population in Scotland. This licence was obtained by Telefonica (O2). Although only requiring Telefonica to achieve this level of coverage, it is worth noting that its infrastructure is shared with Vodafone and resulting network competition has led to other operators, such as EE, promising widespread coverage.

To ensure satisfactory mobile coverage it is clear that auction design is critical in countries with large geographical areas with sparse populations, to give consumers access to service and choice. With independence, we can learn from the regulatory and policy regimes of countries like Sweden to achieve greater coverage target. 4G coverage in Sweden is already at over 90 per cent.

Postal delivery services and Royal Mail

Postal services are of great importance in Scotland, particularly in rural and island communities. Independence will provide the opportunity to ensure a universal postal service is in place which suits Scotland's needs, in particular the needs of our remote and rural communities. Scotland's Future sets out this Government's intention to match, as a minimum, the level of service provision inherited from the UK on independence, which is currently a six days per week service for mail. Regulating postal services will also allow an independent Scottish government to take steps to address the high cost of parcel delivery in remote and rural areas.

Scotland's Future also sets out this Government's intention to begin the process of renationalising the Royal Mail in Scotland on independence, and to focus Post Office services on what is best for communities and businesses across Scotland.

Tourism

Tourism can contribute to a diversified and sustainable economy, attracting and servicing inward investment and promoting population growth. The Scottish Government Economic Strategy recognises that tourism is a key economic sector for Scotland. As well as the direct economic impact for businesses and individuals tourism can contribute in the wider context to a diversified and sustainable economy, attracting and servicing inward investment and promoting population growth. Natural, social and community assets and activities are key components of the Island Areas' tourism offer and a source of creative content. It is clear why tourism is vital to the islands - and why the islands have so much to offer.

Tourism can contribute in the wider context to a diversified and sustainable economy.

Between October 2012 and September 2013, a pan-island visitor survey was carried out by VisitScotland, HIE, Orkney and Shetland Islands Councils and Comhairle nan Eilean Siar. It showed that food and drink, as an example, represents a significant part of visitor spend within an area - and sometimes it is the motivation to visit an area in the first place.

The Scottish Government will support stronger partnership between Scotland's islands, VisitScotland, Transport Scotland and other stakeholders to make the most of the opportunities to promote tourism to Scotland's islands. The revised VisitScotland National Tourism Development Framework shows where key investment opportunities are needed - and where current strengths/assets lie.

The Scottish Government recognises the important role of transport connectivity for the tourism sector in the islands.

The Scottish Government welcomes support from the Islands Councils for the future Focus Years and recognises that these present an excellent opportunity to make best use of the varied island assets - and partners on the islands are already being encouraged to work with VisitScotland to harness the unique potential of these years.

The Scottish Government is committed to work with the Islands Councils, and island communities, on an operational level to realise their unique potential as destinations, improve the use of resources, assist in promoting the sharing of infrastructure to promote tourism, and help introduce solutions that are particularly suited to the islands. This work could include, but would not be limited, to:

• working with Islands Councils on how existing Knowledge Sharing Platforms can be used to promote closer working (including sharing relevant research findings) between public bodies, local authorities, the industry itself and also third sector organisations;
• examining how initial work by Orkney Islands Council on an Invitation To Tender for coach services can be used as a model business case for wider application across all the islands - and look at what options there are for supporting further collaborative work;
• government officials and relevant NDPB staff working with industry and Islands Councils to demonstrate value added already through initiatives such as Mallin Waters - and the wider potential for transnational markets that marine offers; and
• in addition to the existing marine tourism work, examining next steps in collaborating on a response to the February 2014 European Commission Communication 'A European Strategy for more Growth and jobs in Coastal and maritime tourism' COM (2014) 86. Within the specific work on this strategy there are several Commission proposals where Islands Councils could play a key role.

The islands form a crucial part of the wider marketing of Scotland. Their being part of the VisitScotland campaigns opens up much greater opportunities, much greater reach and much greater exposure - especially in this 2014 Year of Homecoming Scotland - when the eyes of the world are upon us.

Culture and Creative Industries

The importance of the creative industries to Scotland is recognised by the inclusion of creative industries as one of seven key growth sectors in the Government Economic Strategy (along with Energy, Financial Services, Food and Drink, Life Sciences, Tourism and Universities). Their general importance to Scotland is at least matched by their importance to our island communities.

The Western Isles, Orkney and Shetland are characterised by the richness of their creative and cultural content and products. Inspired by the 'sense of place' which encompasses environment, community, language (Gaelic and dialects of Scots) and cultural heritage, the islands house a diverse range of practitioners in traditional and contemporary music, literature, arts, fashion and crafts. Broadcasting, textiles and heritage offer significant levels of employment and business opportunity. The islands also host renowned events, festivals and galleries which build on its cultural and creative base. Creative products, part of whose appeal lies in their connection to a specific island community, such as Harris Tweed or jewellery from Orkney, are being exported to an international customer base.

The creative and cultural industries make a substantial contribution to driving economic activity within the islands and offer a significant opportunity for future economic growth and diversification. This is recognised by the University of the Highlands and Islands ( UHI), which has constituent colleges on each Island Area and which has Creative and Cultural Industries as one of its eight subject networks. Within the UHI centres of excellence such as the Orkney Research Centre for Archaeology and the Centre for Nordic Studies (with bases in Orkney and Shetland) capitalise on the unique historic past of these islands in a way that is relevant to today and reaches out our Nordic neighbours and beyond - for example, the Orkney Research Centre for Archaeology recently brought to bear the expertise that they have developed on the standing stones and monuments of the Orkney World Heritage Sites on a fieldwork project on the statues of Easter Island.

Across all three Island Areas, the tourism impacts of the cultural and creative sector are also significant, with visitors being attracted to the area by the islands' museums, nationally significant museum collections, archives and archaeological sites (including World Heritage Sites - Heart of Neolithic Orkney/St Kilda) and monuments. Creative businesses and products provide a range of experiences and opportunities for the visitor during their stay.

The sector also forms part of the social fabric of the islands. Access to, and participation in, creative and cultural activity generate community and social wellbeing, and make the islands an attractive place to live and work.

A large number of enterprises rely on local markets (typically the smaller scale enterprises), whilst a smaller number of enterprises (typically the larger 'market leaders') have national and international markets.

The sector is characterised by a broad and diverse mix of activities - from larger employers such as those in heritage and broadcasting, to self-employed entities - from 'extreme lifestylers' through 'portfolio lifestyles' to micro-businesses.

The Scottish Government recognises the indigenous strengths of Scotland's islands: Norse and Gaelic heritage and culture.

The Scottish Government recognises the indigenous strengths of Scotland's islands: Norse and Gaelic heritage and culture; archaeological and natural heritage; Gaelic content and broadcasting and crafts and fashion. The Scottish Government is committed to continue to support the Norse and Gaelic heritage, culture and language among the island communities. With independence a Scottish Broadcasting Service could develop opt-out broadcasting at sub-Scotland level, including to the islands, to reflect their culture and local current affairs.

The Scottish public sector supports the cultural and creative industries in a range of ways. Local authorities advise and assist small firms and start-ups, including through the Business Gateway. Highlands and Islands Enterprise provides targeted support. In particular, Creative Scotland has a specific remit to support the cultural and creative industries. Through that, Creative Scotland plays an important role in supporting the culture of the island communities. Reflecting the prominence of the islands in the creative sector, Creative Scotland's investment per head of population in the Western Isles, Orkney and Shetland in 2012-13 saw them in second, fourth and fifth place respectively among Scotland's 32 local authority areas. It has a track record of investing in their vibrant musical traditions, demonstrated, for example, by the recent artists' bursary for research into Shetland's fiddle repertory. The Scottish Government will facilitate further discussion between the islands and Creative Scotland to ensure that this commitment continues.