Once upon a time, Scotland had two successful, internationally respected, well-funded development agencies.
They started life under Labour governments as the Highlands and Islands Development Board (1965) and the Scottish Development Agency (1975) morphing into HIE and Scottish Enterprise in 1991.
The name changes under the Tories were intended to make them sound less statist but their missions never really changed. The HIDB/HIE in particular had a strong social as well as economic remit and was allowed to be a risk-taker.
One characteristic was leadership by strong, independent-minded chairs. These were major figures in Scottish public life, appointed by politicians who knew they were making trouble for themselves by not choosing yes-men.
Every model needs occasional review and reform. What we have seen over the past decade, however, has been the steady dilution of these agencies while expectations of them as driving forces within the Scottish economy have evaporated.
This week we learned that Scottish Enterprise has run out of money. Its chief executive told staff of a nine per cent budget cut, adding: “We have decided it is prudent to make no new spending commitments or offers of support for financial year 2020-21.” Something similar is going on at HIE.
The Scottish economy is flat-lining while the cupboards are bare. Yet where is the public outcry or protestations from these agencies’ leaders whose predecessors would have been beating down the doors of St Andrew’s House?
At the same time, we have the continuing saga of the Scottish National Investment Bank (SNIB). There already is a Scottish Investment Bank, jointly run by Scottish Enterprise and HIE. Has it too run out of money? It is far from clear why we need another one with “National” in the title.
While SE and HIE are turning away supplicants because they are broke, the SNIB is supposedly to have £2 billion poured into it over ten years. In her budget statement, Kate Forbes announced a “further” £220 million which will “be vital in helping support our ambition towards achieving our climate change targets”.
An ‘unregulated appointment’
The Bank “will aim to be fully self-sustaining based on re-investing the returns from its investments”. What could possibly go wrong? Anyway, economic development and basing a model on “returns from investment” are two different concepts.
Existing agencies can already invest in companies where that is the agreed route but as Professor Ross Brown of St Andrews University has pointed out: “It excludes lots of small businesses who want loans and not equity deals – in other words, most SMEs.”
The appointment of a chair for the oft-announced SNIB has been predictably murky. It is to be led by Willie Watt whose previous claim to fame was as CEO of the investment manager, Martin Currie, when it was on the receiving end of record fines in the UK and US for conflict of interests, which the US Securities and Exchanges Commission described as “fraudulent”.
Mr Watt may have been entirely blameless but such a track record suggests complete transparency would have been prudent before helicoptering him into an influential public position. Instead, the exact opposite happened through an “unregulated appointment”.
Delusions of grandeur
Scotland’s Ethical Standards Commissioner told a Holyrood committee that the former Finance Secretary, Derek Mackay, was repeatedly advised an amendment to legislation was required to bring the appointment within normal processes. This did not happen, so they appointed him anyway.
Scotland would be a lot better served by the old model – strong, creative development agencies with economic and social remits led by people prepared to stand up to government. That is the last thing our devolved rulers would now tolerate.
Instead we are to have a coterie of Edinburgh financiers, hand-picked by ministers, licensed to gamble with public money. Progress? I think not.
Interviewed by the Financial Times in 2009, as his fellow panjandrums were bringing two great Scottish institutions to their knees, Mr Watt reflected: “I don’t think the man in the street is equating the problems of RBS and HBOS with Scottishness. I’d be very worried if they did.”
So would I. Not all Scots should be blamed for cronyism, delusions of grandeur and recklessness with other people’s money.