What should we look for from this new Scottish National Investment Bank?

© PA
First Minister Nicola Sturgeon.

Is Scotland any good at boosting the economy? It’s a question we should ask, as First Minister Nicola Sturgeon has announced a Scottish National Investment Bank (SNIB).

It sounds good and is one of those policy perennials which people call for and pin the hope of stable economic growth upon.

Yet for this major announcement in the most important policy speech of the year, the FM’s Programme for Government, the Scottish Government has no further information.

We know banker Benny Higgins has been asked to develop the bank’s remit. We don’t know when he was asked or when he’s due to report but that’s not what’s really important – what matters is: what is the remit of his search for a remit? For example, can he look at the functioning of the Scottish Government’s own capital spend?

A national investment bank could mean one that takes over the resonsibility for road, house and bridge building and runs that as an agency at arm’s length from government.

There would be merit in this – full-time professionals determining Scotland’s infrastructure rather than political randoms out to please voters might produce better long-term investment.

That would mean Mr Higgins might call into question not only the government’s department of transport, say, but also the transport agency, conveniently called Transport Scotland. However, it may have no role whatsoever in public investment plans and focus only on the private.

A national investment bank could lend money at long-term rates to established buinesses to allow them to grow. In which case, where does it get its money?

The Scottish Government could make the SNIB independent of government and so able to issue bonds to raise billions for investment.

In which case, it is competing with the commercial banks – no bad thing given the performance of the Royal Bank of Scotland but who carries the risk if it goes belly-up?

If the SNIB’s role is to help private companies, then does Benny Higgins get to question the existence of Scottish Enterprise, the agency currently charged with helping entrepreneurs?

SE sits on assets of half a billion pounds, £400 million of which is not tied up in pensions.

It could be a great thing if that money were used to start the SNIB, but that would mean a lot of white collar jobs going at SE.

The remit for Mr Higgins remit is everything because Scotland has a labyrinth of economic funds and agencies. Scotland had the world’s first economic development agency – the Highlands and Islands Development Board – established in 1965. Ten years later the Scottish Development Agency was formed, which in 1991 became Scottish Enterprise (absorbing the Scottish Training Agency).

Later, SE set up the Scottish Investment Bank and, in 2008, training was returned to a separate agency called Skills Development Scotland.

Within these structures are a plethora of funds and countless government announcements of ‘extra’ money. The most notable of these in recent times was last year’s Holyrood Growth Fund, which promised £500 million for companies that wanted to expand. It was never made clear if this was separate from the Scottish Investment Bank or Scottish Enterprise. As it turns out, it didn’t matter, as to date not a penny has been paid out from the fund.

It is near-impossible to tell if Scotland’s enterprise budget is many billions, or the same few billions parcelled up in different ways for presentation purposes. Mr Higgins’ remit could cover this, too.

Which takes us to the SNP government’s initial economic wheeze, back in 2007, of creating the Scottish Futures Trust, which has the slogan “working with Scotland’s private and public sectors” and has been the body that disguises the Scottish Government’s use of private finance to fund public works.

Does Mr Higgins get to question the existence of the SFT? This is another question that has no answer – at the time of writing, neither the Scottish Government nor Scottish Enterprise had responded to The Courier’s request for detail.

Promoting growth through government agencies appears like a good thing and Scotland has lots of them. The problem is that it is hard to tell if they are any good.

It is not hard to show they meet ‘targets’, nor that money comes in and goes out again – much as it’s easy to show that people are employed, brochures are glossy and Holyrood committees are humoured. Hard evidence that the panoply of agencies is actually making a difference is more elusive.

The Fraser of Allander Institute – our most respected economic thinktank – reports that Scotland’s economy has not improved one jot since 2007, as measured against Scottish Government targets published that year. This is why it’s the remit for the remit that matters.

It’s not what the new SNIB does but how it fits in with all the other agencies, all the other funds, that matters. Most of all, we need to know why a history of agencies has done so little, and ask if we wouldn’t be better investing in the quality of our people before creating another quango.

If an SNIB is needed, which other enterprise agencies are not?