A leading economist has said that Scotland's new investment bank should not offer "absurd" salaries but should attract talented people through the "honour" of working for it.
Professor Mariana Mazzucato of University College London told MSPs that rather than offering salaries on a par with Edinburgh's financial services sector working for the new Scottish National Investment Bank bank should be reframed as an "honour", to ensure it recruits talented people.
She also said the bank was a "wonderful experiment" which could transform the country's public sector.
Speaking at Holyrood's economy committee, which is scrutinising the Scottish Government's Bill for the creation of the new national bank, Professor Mazzucato was asked about renumeration of SNIB employees.
She said that if the aim of the bank was to be "mission-orientated" then it would attract people to it. "We need to re-frame what the public sector is for, to really attract some of the top talent we have in our societies - and the bank is a good way to do that," she said.
"The bank is a wonderful experiment in Scotland precisely to see what its like to transform our imagination of what the public sector is for. I don't think you need to match the, what I find often absurd, salaries of the banking sector - although you won't attract people with investment and sectoral and scientific expertise if you're under paying them. But if you really are a mission-orientated bank I believe you will attract people who want to make a difference in the world."
Mazzucato, who recently awarded the 2019 All European Academies Madame de Staël Prize for Cultural Values, and who sits on the Scottish Government's panel of economic advisors, said that in terms of salaries for bank staff, then the answer was "somewhere in the middle" between civil servant pay grades and the private financial sector.
But she added: "I have been working on the concept of missions for more than a decade - there's a concept of mission mystique, of the honour of working for a mission orientated agency. Obama with his post crisis fiscal stimulus of $800bn said his mission was to use that to create a green economy, and in doing that he was able to bring in a Nobel prize-wining physicist Steve Chu to be director of the department of energy. Because he thought it was an honour to do that he left Stanford University and it wasn't to create a carbon tax or to simply come in and fix market failure, it was to help the government have a transition, and we need to remember that.
"Many public sector workers are under paid, but you have to make sure that the remit of the bank is really ambitious, so that it will be an honour to work in that bank and historically that has served well in bringing in high level expertise to govt organisations. But when you have curricula, a training of public servants which has led to the idea that 'you're just there to fix a market failure', well would you rather go take risks and be a creative actor creating value or just facilitating, enabling and fixing market failures? You'd probably choose the first."
The Scottish Government published the Bill for the proposed development of a Scottish National Investment Bank earlier this year, with the expectation that it will boost Scottish productivity and growth.
Prof Mazzucato said that it was vital that the bank did not restrict itself to investing solely in the private sector, and urged the committee to ensure that social enterprises and charities were also included as potential investment opportunities.
She said: "It does make sense that the public sector doesn't lend to the public sector, but to be using the bank to provide patient, long term, committed mission-orientated finance to organisations in both private and social enterprises and other types of third sector institutions is absolutely important, given that today many of the problems out there, if you think of the energy challenge and health challenge globally, are being invested in by philanthropy, by private and public institutions and civil society organisations so that's what you want to be doing - fuelling multiple solutions to problems across different actors."
She also told MSPs that if the bank is structured in the correct way "not a hand out bank but targeted towards societal challenges" then it could make a major impact in attracting other investment from the private finance sector.