Plans for Scottish National Investment Bank passed by Holyrood

MSPs have backed plans for a Scottish National Investment Bank, which the economy secretary said has the potential to become "a cornerstone in Scotland's economic architecture".

Economy secretary Derek Mackay

Legislation to create a national bank to invest in projects linked to the Government's economic strategy has passed the first stage towards becoming law with cross-party support at Holyrood.

Introducing the bill, economy secretary Derek Mackay explained the bank would make investments that "support sustainable and inclusive growth across Scotland" and be held to account by the Scottish Government.

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Mr Mackay added: "It will also seek to make a sufficient return on its investments so that it can cover its operating costs and not be reliant for the long-term on the Scottish Government and Scottish taxpayer."

Assessing the Scottish economic landscape, Mr Mackay said: "Business investment levels are low and their potential for growth has been curbed.

"Scotland's business expenditure on research and development, and innovation performance, is behind that of other European nations.

"Our productivity growth in key sectors, while outperforming the UK, also remains modest.

"These factors point to the need for a new investor in the Scottish economy - one with patience and strategic oversight to reinforce and enhance Scotland's position."

The bank will be funded by putting an initial £2 billion of capital - 1.3 per cent of GDP - into the bank, described by Mr Mackay as "an ambitious, but achievable level of funding" without putting off private investors.

"We need to see a transformational change in Scotland's economy," he said, with growth at half the rate of the rest of the UK "resulting in a record fiscal deficit in Scotland higher than any other country in Europe".

Mr Lockhart added: "The ongoing confusion, clutter, duplication and lack of alignment which characterises this Government's approach to the economy means there is a real risk the bank will fail to meet its ambitious objectives."

On the issue of cost, he said: "The Scottish taxpayer (would be) spending £150 million a year in running costs before a single penny is invested in the economy so we need to ensure we see a real return on this investment."

Scottish Labour leader Richard Leonard called for the project to focus on more than just making profits.

He said: "The purpose of the bank that we will create with this legislation cannot simply be about the best rate of financial return alone.

"It must be ethical. It must take account of the strategic interests of the wider economy like the urgent need to tackle climate change.

"It must be empowered to build a more equal and democratic society. It must be on the side of the people."

Mr Leonard said Scottish Labour plans for a UK-wide investment bank would invest £20 billion, arguing the investment from the Scottish Government was "not ambitious enough".

Criticising an economy "run in the interests of private capital and not for the people", Scottish Greens MSP Andy Wightman said: "It's been refreshing in recent years to see an increasingly positive case being made for an economy where the public interest is placed more at the heart of public policy."

Mr Wightman said the investment bank would be "central" to delivering the Green New Deal his party has devised in recent weeks.

He said achieving net-zero emissions should be a goal specifically laid out in the Bill, as well as allowing local government to have an ownership stake in the bank and ensuring its missions are subject to parliamentary approval.

Scottish Liberal Democrat Leader Willie Rennie said he also believed the bank should be used mainly to tackle climate change.

He told the chamber: "The Programme for Government rightly set out tackling climate change as a key aim of the bank but that needs to be clearly set out in the legislation underpinning it.

"As Friends of the Earth pointed out, the bill doesn't mention climate change once.

"The bank needs to focus, not just on fixing market failures, but creating and shaping new markets and tackling societal changes.

"There is no bigger challenge than the climate emergency, and the bank needs to help drive the transition away from carbon industries."