Explanatory Notes

South of Scotland Enterprise Act 2019

2019 asp 9

12 July 2019

THE ACT

Establishment

Section 1 (South of Scotland Enterprise)

5.Section 1 brings South of Scotland Enterprise into existence as a legal person.

6.Subsection (2) states that it is a body corporate. This means that it has a legal personality separate from that of the people who comprise it (see section 2) so that, ordinarily, those people will not be personally liable for things done, or not done, by South of Scotland Enterprise.

Section 2 (People constituting body and staff)

7.Subsection (1) of section 2 provides that South of Scotland Enterprise is to be comprised by its appointed members and its chief executive. This means, in effect, that they collectively constitute its governing board.

8.South of Scotland Enterprise is to have between 6 and 11 appointed members; that is a chairing member and between 5 and 10 ordinary members.

9.Subsection (2) makes schedule 1 part of the Act. For an explanation of the schedule’s provisions see paragraphs 60 to 68 of these Notes. Amongst other things, schedule 1 deals with the appointment of South of Scotland Enterprise’s members and its chief executive.

Section 3 (Exclusion of Crown status)

10.Section 3 confirms that South of Scotland Enterprise is not an emanation of the Crown. The Crown, which for this purpose broadly means the executive branch of government, enjoys certain privileges and immunities in law. South of Scotland Enterprise is not to be regarded as a government body and therefore none of the particular legal rules that apply to government bodies apply to South of Scotland Enterprise.

11.Subsection (2) of section 3 confirms that South of Scotland Enterprise’s members and staff are not civil servants. This means that none of the statutes that make provision about the civil service (see, for example, Part 1 of the Constitutional Reform and Governance Act 2010) apply to the people who comprise, and work for, South of Scotland Enterprise.

Section 4 (Application of public bodies legislation)

12.Section 4 makes schedule 2 part of the Act. For an explanation of the schedule’s provisions see paragraphs 69 to 87 of these Notes.

13.Schedule 2 modifies other enactments, including subordinate legislation. Where primary legislation, like the Act, modifies another enactment (“enactment A”), and an earlier enactment confers a power to modify enactment A by subordinate legislation, there may be doubt about whether that power can be used to further modify enactment A. Section 4(2) confirms that any power to modify an enactment can continue to be used to modify that enactment even to the extent that it has been modified by schedule 2.

Aims and powers

Section 5 (Aims)

14.Section 5 sets out the aims of South of Scotland Enterprise.

15.Subsection (3) allows the Scottish Ministers to change, or clarify, its aims by regulations. Regulations doing so will be subject to scrutiny by the Scottish Parliament under the affirmative procedure (see section 22).

Section 6 (Action plan)

16.Section 6 requires South of Scotland Enterprise to have, and keep up to date, an action plan setting out what it proposes to do to achieve its aims (which are set out in section 5). Its general power to act under section 8 can only be exercised in ways that are consistent with the action plan (see subsection (1)(b) of section 8).

17.Subsection (2) requires that before making or modifying its action plan, South of Scotland Enterprise get the Scottish Ministers’ agreement to the plan or modification in draft. Before making its first action plan, South of Scotland Enterprise must consult about it in accordance with section 7.

Section 7 (Consultation on action plan)

18.Section 7 requires South of Scotland Enterprise to consult about its action plan at least every 5 years. The first consultation is to take place as part of the process by which the first action plan is prepared.

19.At the end of each statutory consultation, South of Scotland Enterprise is to produce a report setting out what, if anything, it intends to do in light of the consultation responses (see subsection (4)). One thing South of Scotland Enterprise may decide to in light of consultation responses is revise its action plan, which it is empowered to do at any time by section 6.

20.Subsection (2) of section 7 requires that South of Scotland Enterprise produce and make publicly available a consultation strategy ahead of carrying out a statutory consultation about its action plan. It must carry out its consultation in accordance with the strategy (see subsection (3)(a)). Subsection (3)(b) requires that South of Scotland Enterprise also seek views from Dumfries and Galloway Council and Scottish Borders Council, being the two local authorities whose areas comprise the South of Scotland as defined by section 21.

21.Subsection (6) of section 7 allows the Scottish Minsters to change the date on which South of Scotland Enterprise would otherwise be required by subsection (1) to begin its next consultation about its action plan. This is to ensure that there can be close alignment, as at the time the Bill for the Act received Royal Assent (i.e. July 2019) and after, between the planning cycles of South of Scotland Enterprise and Scotland’s other enterprise agencies (namely Scottish Enterprise and Highlands and Islands Enterprise) Should the cycles change and fall out of synchronisation, subsection (6) allows the Scottish Ministers to bring South of Scotland Enterprise’s consultation cycle back into alignment with that of the other enterprise agencies. Any change to the next consultation date is to be effected by regulations which, under section 30 of the Interpretation and Legislative Reform (Scotland) Act 2010, must be laid before the Scottish Parliament.

Section 8 (General powers)

22.Subsection (1) of section 8 gives South of Scotland Enterprise powers to act in order to achieve its aims (which are set out in section 5) and to do other things connected to performing any of its other functions (for example, it may hire an accountancy firm to help it fulfil its function of preparing annual accounts under section 15).

23.Subsection (1)(b) limits South of Scotland Enterprise to acting in ways that are consistent with its action plan (see section 6).

24.Subsection (2) gives some specific examples of the things that South of Scotland Enterprise is empowered to do by subsection (1). The list is not exhaustive.

25.Subsection (3) restricts the ability of South of Scotland Enterprise to borrow money. It is permitted to do so from only two sources. The first is the Scottish Ministers. The second is its own subsidiaries. The word “subsidiary” is defined for this purpose by section 1159 of the Companies Act 2006. Loosely, in this context, it means a corporation that is to a certain degree under the control of South of Scotland Enterprise and so would include, for example, a limited company set up by South of Scotland Enterprise provided that the majority of voting rights in the company were held by South of Scotland Enterprise.

26.Subsection (4) gives South of Scotland Enterprise the power to charge for providing services.

Operational matters

Section 9 (Headquarters)

27.Section 9 places the Scottish Ministers under a legal duty to direct South of Scotland Enterprise to have its headquarters somewhere in the South of Scotland (as defined in section 21). It is for the Scottish Ministers to specify in the direction where in the South of Scotland the headquarters must be.

28.As the direction about the location of South of Scotland Enterprise’s headquarters will be issued under section 17, South of Scotland Enterprise will be legally required to comply with it and the direction will be published.

Section 10 (Committees)

29.Section 10 allows South of Scotland Enterprise to set up committees, which can have sub-committees. The members of committees and sub-committees need not be members of South of Scotland Enterprise, which means that setting up committees and sub-committees can be a way for South of Scotland Enterprise to bring in people with expertise or perspectives its members may not have. Section 13 allows South of Scotland Enterprise to delegate functions to its committees and sub-committees, meaning those bodies can have more than an advisory role.

30.Subsection (3) (which is elaborated on by subsections (4) and (5)) allows arrangements to be made for committee and sub-committee members to be paid and receive other financial rewards and have their expenses met. Payments under such arrangements are to be made by South of Scotland Enterprise, but can only be made on a basis determined by the Scottish Ministers.

Section 11 (Workers’ interests committees)

31.Section 11 places South of Scotland Enterprise under a duty to set up a workers’ interests committee using its power to setup committees under section 10. The purpose of the workers’ interests committee is to advise South of Scotland Enterprise on what it should be doing to advance the interests of workers.

32.Under section 10 it is for South of Scotland Enterprise to decide who to appoint to its committees, but section 11(2) requires that at least one member of the workers’ interests committee be nominated by a trade union operating in the South of Scotland (see section 21 for the definition of “South of Scotland”).

Section 13 (Authority to perform functions)

33.Section 13 allows South of Scotland Enterprise to delegate its functions or aspects of them to its members, committees, sub-committees or staff. This means that not everything that may, or must, be done by South of Scotland Enterprise need be done by collective act of the people who constitute it (i.e. the members and its chief executive, see section 2).

34.Subsection (2) emphasises that South of Scotland Enterprise cannot absolve itself from its legal responsibilities to do certain things by entrusting others to do them on its behalf. It further makes clear that delegating a function does not divest South of Scotland Enterprise of its own powers to carry out the function.

Section 14 (Validity of things done)

35.South of Scotland Enterprise consists of its members and chief executive (see section 2). If, for any length of time, there were to be a problem with its membership (for example if it were to have fewer properly appointed members than section 2 requires), there may be doubts about the legal validity of anything done by South of Scotland Enterprise during that time when it was not properly constituted. Similar concerns may arise in relation to the acts of South of Scotland Enterprise’s committees or sub-committees; the rules about the membership of those bodies will be set by South of Scotland Enterprise itself by virtue of section 10.

36.Section 14 forecloses any doubt there may otherwise have been about the legal validity of things done by South of Scotland Enterprise or any of its committees or sub-committees as a result of:

Accountability

Section 15 (Accounts and audit)

37.Section 15 requires South of Scotland Enterprise to prepare accounting records for each financial year and submit them to the Auditor General for Scotland for audit. The phrase “financial year” is defined in schedule 1 of the Interpretation and Legislative Reform (Scotland) Act 2010.

38.Because South of Scotland Enterprise is required, by statute, to send its accounts to the Auditor General for Scotland, sections 21 and 22 of the Public Finance and Accountability (Scotland) Act 2000 (“the 2000 Act”) apply. Amongst other things, those sections provide for the accounts, and the auditor’s report on them, to be laid before the Scottish Parliament and published (see section 22(5) of the 2000 Act).

39.In addition, because sections 21 and 22 of the 2000 Act apply to the accounts of South of Scotland Enterprise:

40.The Scottish Public Finance Manual, which is guidance issued by the Scottish Ministers as to the proper handling and reporting of public funds, states that “sponsored bodies” (of which South of Scotland Enterprise will be one) should be required to keep their accounts in such form as the Scottish Ministers direct. The power for the Ministers to give directions to South of Scotland Enterprise is to be found in section 17.

Section 16 (Annual report)

41.Section 16 requires South of Scotland Enterprise to report to the Scottish Ministers after each financial year on what it has done in that year. The section further requires that the Scottish Ministers lay the annual reports before the Scottish Parliament.

42.The phrase “financial year” is defined in schedule 1 of the Interpretation and Legislative Reform (Scotland) Act 2010.

43.The reporting obligation under section 16 is in addition to the following other reporting obligations:

Ministerial powers

Section 17 (Direction)

44.Section 17 places South of Scotland Enterprise under a legal duty to comply with ministerial directions in carrying out its functions. It also requires that the Scottish Ministers consult South of Scotland Enterprise before issuing directions to it, and publish any directions and the reasons for issuing them.

Section 18 (Fair work direction)

45.Section 18 requires that the Scottish Ministers issue a direction about fair work to South of Scotland Enterprise. The direction is to set out that South of Scotland Enterprise must promote fair work, and is to define what “fair work” means for the direction’s purposes. The direction may also include any other provision about South of Scotland Enterprise’s promotion of fair work that the Scottish Ministers consider appropriate. As the fair work direction will be a direction under section 17, South of Scotland Enterprise will be under a legal duty to comply with it.

46.Subsection (3) of section 18 requires that the Scottish Ministers consult workers and employers in the South of Scotland before issuing the fair work direction. As with any direction under section 17, the Ministers will also be required to consult South of Scotland Enterprise itself (see section 17(3)).

47.A direction under section 18 must be issued within 1 year of the section coming into force. The section is to come into force on a day appointed by the Scottish Ministers by regulations under section 24.

Section 19 (Financial assistance)

48.Section 19 provides a statutory basis for the Scottish Ministers to give financial support, of various kinds, to South of Scotland Enterprise.

Transfers from Scottish Enterprise

Section 20 (Transfer of property and liabilities)

49.South of Scotland Enterprise will, to an extent, take over some of the activities of Scottish Enterprise in the South of Scotland area. To facilitate that, section 20 allows for some of Scottish Enterprise’s property, and its liabilities, to be transferred to South of Scotland Enterprise.

50.The transfer effected by section 20 will take place on the day the section comes into force, which is to be appointed by the Scottish Ministers by regulations (see section 24).

51.Precisely what property and liabilities will transfer to South of Scotland Enterprise will be set out by the Scottish Ministers in regulations. Those regulations will be laid before the Scottish Parliament in accordance with section 30 of the Interpretation and Legislative Reform (Scotland) Act 2010.

Interpretation

Section 21 (Meaning of South of Scotland)

52.Section 21 defines “the South of Scotland” for the purposes of the Act. It defines the South of Scotland by reference to the local government areas of the Scottish Borders Council and Dumfries and Galloway Council. Scotland’s local government areas are identified in schedule 1 of the Local Government etc. (Scotland) Act 1994.

Final provisions

Section 22 (Ancillary provision)

53.Section 22 enables the Scottish Ministers to make ancillary provision, by regulations, to give full effect to the Act or any provision made under it. This includes the power to modify other enactments (including the Act itself).

54.Regulations made under section 22 that amend the text of primary legislation (including the Act) are subject to the affirmative procedure. Otherwise, regulations under section 22 are subject to the negative procedure (see section 23).

Section 23 (Regulation-making powers)

55.Section 23 makes provision in relation to the regulation-making powers that the Act confers on the Scottish Ministers.

56.The negative procedure is defined in section 28 of the Interpretation and Legislative Reform (Scotland) Act 2010. The affirmative procedure is defined in section 29 of that Act.

Section 24 (Commencement)

57.Section 24 deals with when the Act’s provisions come into effect as a matter of law.

58.The Act’s final provisions (i.e. sections 22 to 25) take effect on 13 July 2019, which is the day after the Bill for the Act received Royal Assent.(1)

59.The rest of the Act’s provisions take effect on the day, or days, appointed by the Scottish Ministers in regulations. Section 23(1) allows the regulations to appoint different days for different purposes. Regulations appointing the day that some or all of the Act’s provisions take effect will be laid before the Scottish Parliament in accordance with section 30 of the Interpretation and Legislative Reform (Scotland) Act 2010.

Schedule 1

Part 1: Members

60.As section 2 provides, South of Scotland Enterprise consists of its members and its chief executive (as to whom see paragraphs 66 and 67 of these Notes). All of the members of South of Scotland Enterprise (the numbers of which are regulated by section 2) are to be appointed by the Scottish Ministers, and it is for the Ministers to appoint the chairing member to that office (see paragraph 1 of schedule 1). Certain people are disqualified from appointment by paragraph 4 of schedule 1.

61.Amendments made by schedule 2 mean that the appointment of members will need to be carried out in accordance with the code of practice on public appointments produced by the Commissioner for Ethical Standards in Public Life in Scotland, and the Gender Representation on Public Boards (Scotland) Act 2018. Separately, section 159 (positive action: recruitment and promotion) of the Equality Act 2010 will also apply in relation to the appointment of members.

62.On appointing someone as a member, the Scottish Ministers are to specify how long the person is to remain a member as a result of that appointment (see paragraph 2 of schedule 1). The person may continue as a member beyond that period by being re-appointed by the Scottish Ministers for another period.

63.Paragraph 3 of schedule 1 sets out the circumstances in which someone can cease to be a member of South of Scotland Enterprise before the person’s period of appointment is up, namely:

64.If someone ceases to be a member before the person’s period of appointment has ended, the Scottish Ministers can direct South of Scotland Enterprise to pay that person a sum of money as compensation for the premature loss of office (see paragraph 5(2) and (3) of schedule 1).

Part 2: Staff

65.Part 2 of schedule 1 deals with South of Scotland Enterprise’s staff.

66.Paragraph 7 requires South of Scotland Enterprise to have at least one member of staff: a chief executive. The chief executive is one of the people who constitutes South of Scotland Enterprise (see section 2).

67.Paragraph 7 of schedule 1 provides for the first chief executive to be appointed by the Scottish Ministers. Thereafter, chief executives are to be appointed by South of Scotland Enterprise itself (subject to obtaining the Scottish Ministers’ approval for the appointment). The first chief executive’s terms and conditions of appointment are to be set by the Scottish Ministers. The terms and conditions of subsequent chief executives are to be set by South of Scotland Enterprise, subject to obtaining the Scottish Ministers’ approval (see paragraph 9 of schedule 1).

68.Paragraph 8 of schedule 1 allows South of Scotland Enterprise to appoint other staff (i.e. staff other than the chief executive). South of Scotland Enterprise are to set the terms and conditions of employment for those staff, subject to obtaining the Scottish Ministers’ approval (see paragraph 9 of schedule 1).

Schedule 2

Ethical Standards in Public Life etc. (Scotland) Act 2000

69.Paragraph 1 of schedule 2 adds South of Scotland Enterprise to the list of devolved public bodies in schedule 3 of the Ethical Standards in Public Life etc. (Scotland) Act 2000. This means that South of Scotland Enterprise will need to:

Scottish Public Services Ombudsman Act 2002

70.Paragraph 2 of schedule 2 adds South of Scotland Enterprise to the list of authorities in schedule 2 of the Scottish Public Services Ombudsman Act 2002 (“the 2002 Act”). The effect is to:

Freedom of Information (Scotland) Act 2002

71.Paragraph 3 of schedule 2 adds South of Scotland Enterprise to the list of Scottish public authorities in schedule 1 of the Freedom of Information (Scotland) Act 2002. This means that South of Scotland Enterprise will be subject to the requirements that Act places on public bodies, including requirements to provide information to the public on request and to have in place a scheme for the pro-active publication of information it holds.

72.Being a public authority within the meaning of the Freedom of Information Act also makes South of Scotland Enterprise a “Scottish public authority” to which the Environmental Information (Scotland) Regulations 2004 apply.

73.In addition, as a public authority within the meaning of the Freedom of Information Act, South of Scotland Enterprise is a “public authority” or “public body” for the purposes of the General Data Protection Regulation by virtue of section 7 of the Data Protection Act 2018 (subject to the Secretary of State not making regulations under that section to remove its “public authority” status). The General Data Protection Regulation (also commonly referred to by the acronym “GDPR”) is Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data. There are particular rules applied to bodies classified as “public authorities” (over and above those applied to all data processors) in the GDPR and the Data Protection Act 2018. An analysis of those rules is beyond the scope of these Notes.

74.In addition, being a public authority within the meaning of the Freedom of Information Act makes South of Scotland Enterprise subject to the duties imposed by section 44 of the Climate Change (Scotland) Act 2009, and as such liable to monitoring and investigation under Part 4 of that Act.

Public Appointments and Public Bodies etc. (Scotland) Act 2003

75.Paragraph 4 of schedule 2 adds South of Scotland Enterprise to the list of specified authorities in schedule 2 of the Public Appointments and Public Bodies etc. (Scotland) Act 2003. This means that the Scottish Ministers, when appointing South of Scotland Enterprise’s members and first chief executive, will need to comply with the code of practice on public appointments produced by the Commissioner for Ethical Standards in Public Life in Scotland.

Further and Higher Education (Scotland) Act 2005

76.Paragraph 5 of schedule 2 adds South of Scotland Enterprise to several lists of persons in the Further and Higher Education (Scotland) Act 2005 (the “2005 Act”). The effect is to make South of Scotland Enterprise one of the persons with which certain bodies identified in that Act must (where appropriate) consult and seek to collaborate in exercising their functions.

77.The amended sections of the 2005 Act are as follows:

Public Services Reform (Scotland) Act 2010

78.Paragraph 6(2) of schedule 2 adds South of Scotland Enterprise to the list of bodies in schedule 5 of the Public Services Reform (Scotland) Act 2010 (“the 2010 Act”). This means that it is a body in relation to which an order can be made under section 14 of the 2010 Act. Such an order can (subject to restrictions, and only after the Scottish Parliament has approved a draft of the order):

79.Paragraph 6(3) of schedule 2 adds South of Scotland Enterprise to the list of bodies in schedule 8 of the 2010 Act. This means that South of Scotland Enterprise will be subject to the duties to report after each financial year on:

Public Records (Scotland) Act 2011

80.Paragraph 7 of schedule 2 makes South of Scotland Enterprise subject to the duties created by the Public Records (Scotland) Act 2011 to produce, implement and keep under review a records management plan.

Water Resources (Scotland) Act 2013

81.Paragraph 8 of schedule 2 adds South of Scotland Enterprise to the list of bodies to which the Scottish Ministers can give directions under section 2 of the Water Resources (Scotland) Act 2013. A direction to South of Scotland Enterprise under section 2 would be for the purpose of securing its participation in a project to develop the value of Scotland’s water resources.

Community Empowerment (Scotland) Act 2015

82.Paragraph 9(2) of schedule 2 adds South of Scotland Enterprise to the list of persons in section 13 of the Community Empowerment (Scotland) Act 2015 (“the 2015 Act “) who have a duty to facilitate community planning and take reasonable steps to ensure that community planning partnerships (established under that Act) carry out their functions efficiently and effectively.

83.The community planning partnerships that South of Scotland Enterprise has duties in relation to are the partnerships that include the Scottish Borders Council and Dumfries and Galloway Council as South of Scotland Enterprise’s area of operation covers the areas of both of those local authorities (see section 20).

84.Paragraph 9(3) of schedule 2 adds South of Scotland Enterprise to the list of persons in schedule 1 of the 2015 Act. This makes South of Scotland Enterprise a community planning partner for the purposes of Part 2 of the 2015 Act. As mentioned, South of Scotland Enterprise’s area of operation covers the areas of the Scottish Borders Council and Dumfries and Galloway Council and so it will be a community planning partner to both of those local authorities.

85.Paragraph 9(4) of schedule 2 adds South of Scotland Enterprise to the list of persons in schedule 3 of the 2015 Act. This makes South of Scotland Enterprise a “relevant authority” for the purposes of Part 5 of the 2015 Act, which means that its assets may fall to be transferred under that Part to a community transfer body as defined in section 77 of that Act.

Climate Change (Duties of Public Bodies: Reporting Requirements) (Scotland) Order 2015

86.Paragraph 10 of schedule 2 adds South of Scotland Enterprise to the list of bodies in schedule 1 of the Climate Change (Duties of Public Bodies: Reporting Requirements) (Scotland) Order 2015 The bodies listed in schedule 1 of the Order are required to report annually on their compliance with the climate change duties imposed on them by section 44 of the Climate Change (Scotland) Act 2009.

Gender Representation on Public Boards (Scotland) Act 2018

87.Paragraph 11 of schedule 2 adds South of Scotland Enterprise to the list of bodies in schedule 1 of the Gender Representation on Public Boards (Scotland) Act 2018 (“the 2018 Act”). This means that in appointing members to South of Scotland Enterprise, the Scottish Ministers must give preference to a woman if there are equally qualified candidates of either gender and appointing a woman would result in, or be a step towards, 50% of the membership being women (see section 4 of the 2018 Act). In addition, the 2018 Act requires that steps be taken to encourage women to apply to be members of South of Scotland Enterprise (see section 5), and further steps to be taken to promote gender balance in the membership if the 50% target has not been reached by particular dates (see section 6).

1

The process for a Bill becoming an Act is set out in section 28 of the Scotland Act 1998.