What’s in a name? The Scottish national investment bank certainly has “Scottish” in it, and the intention is that its reach will be national and its purpose will be investment. However, it is not a bank; at least, not a retail bank.
As one witness told us:
“Essentially, SNIB is an example of that great Scottish invention, the investment trust—it is not really a bank.”—[Official Report, Economy, Energy and Fair Work Committee, 28 May 2019; c 11.]
The bill to enable the bank that is not really a bank is not quite the whole story either. As the cabinet secretary indicated, much of the detail is to be found elsewhere, in the articles of association and various other supporting materials, strategies, plans, frameworks and charts, and some of those documents are still in draft form or will be left for the bank to devise. I shall not try to cover everything that the committee had to say about the bill and those other component parts; instead, I shall focus on some aspects: patience and purpose, inclusive growth, and missions.
What is it that the bill imposes a duty on the Scottish Government to establish? It is both a public limited company and a non-departmental public body. The bank will be an unusual body, expected to act commercially while at the same time seeking economic, societal and environmental returns. Like the British Business Bank, the plan is for it to become a funder of funders and to crowd-in other investment. The emphasis will be on long-term, or what is called “patient”, capital, informed by a mission-led approach.
Hopes for what the bank can achieve are vertiginously high, but we must look beyond short termism and the limited perspective of the electoral cycle. As one witness put it,
“We are constantly faced with people trying to rewire the building with the power still switched on.”—[Official Report, Economy, Energy and Fair Work Committee, 21 May 2019; c 15.]
That might also be applied to Westminster at the minute.
Another witness cautioned against criticism in the first few years, advising that
“Most of the bad news comes early … The lemons ripen before the plums.”—[Official Report, Economy, Energy and Fair Work Committee, 28 May 2019; c 13.]
If I may add another metaphor to the mix, we were also told that
“There will be red ink spilled in its annual reports and accounts every year until 2023 … if you want long-term patient capital, you have to have long-term patient investors.”—[Official Report, Economy, Energy and Fair Work Committee, 7 May 2019; c 25.]
The economist Mariana Mazzucato underlined the importance of finding the right partners—those who are able to subscribe to the mission-orientated ethos. Rather than “just handout machines”, she favoured public banks that pick
“the ‘willing’, not ... the ‘winners’”,
and she told us that
“The Bank is a wonderful experiment in Scotland to see precisely what it would be like to transform our imagination of what the public sector is for.”—[Official Report, Economy, Energy and Fair Work Committee, 14 May 2019; c 3,13.]
The committee was not convinced the language of the bill matches that aim for the bank to be transformative. We asked the Scottish Government to reflect on the wording of the objects that are set out in section 2—the cabinet secretary has already referred to that. We also invited consideration of how non-financial returns can be anchored in the bill.
How do we measure success? The use of a balanced scorecard was mentioned in an earlier document—the implementation plan—but it does not feature in the bill or anywhere else. The Scottish Government has said that it will lodge amendments at stage 2 to address those points, and the committee welcomes that undertaking.
The bill’s equality impact assessment should also be mentioned, because it was not so well received by some. The Scottish Government has now issued a fully revised assessment—the full detail in the revised assessment can, of course, be read elsewhere.
That brings us to the theme of inclusive growth—a term that is frequently used in policyspeak but is subject to considerable interpretation; the committee has highlighted as much in numerous pieces of work this session.
Research published in June by IPPR Scotland on behalf of the Poverty and Inequality Commission stated:
“The Scottish Government and its agencies could be clearer and more consistent in their definition of inclusive growth and demonstrate how this applied definition translates into practice.”
The Poverty and Inequality Commission concluded that
“inclusive growth appears to be more of a concept than something which results in a tangible outcome.”
It found it “heartening” that inclusive growth was to be built into the bank from the start, but it wanted to ensure that the agenda
“penetrates into the heart of economic policy making”.
The committee recommended that the Scottish Government give careful consideration to those research findings, and, in particular, how it can translate the theory into a clearer vision with tangible delivery. Our concern is that, without clarity, the bank could focus only on financial returns. Therefore, we welcome the positive response in the form of the fairer Scotland duty assessment—yet another document in a crowded field—which recommends that
“the Scottish Government review the ancillary objects contained within the Bill ... utilising its position as a ‘cornerstone in Scotland’s economic architecture’ to shape an economy that is diverse, democratic and which enhances societal wellbeing.”
That is perhaps a slightly long-winded quote, but it is one that is worth sticking with. If one reads the quote carefully, one sees that, in its own circuitous way, the Scottish Government is telling itself that it should listen to the committee—of course, the committee can only heartily agree.
The final issue that I wish to touch on concerns the bank’s vision and the setting of its missions. There will be missions to meet major societal challenges such as carbon reduction and the provision of social care. Such missions will call for multiple solutions from multiple sectors by multiple players. Professor Mazzucato said:
“I encourage the committee to keep provoking on that point.”—[Official Report, Economy, Energy and Fair Work Committee, 14 May 2019; c 4.]
Indeed we shall. We called for the Parliament to have an input to the formulation of the missions. There should be not just a round-table approach—useful as that can be—but a formal consultation process that is akin to the mechanisms that have been devised for climate change and planning legislation. The Scottish Government said that it
“will give consideration to bringing forward amendments to this effect”.
I rather hope that that is a non-committal way of committing, but maybe I am misreading the coded language of bureaucracy.
It was Bob Hope who said:
“A bank is a place that will lend you money if you can prove that you don’t need it.”
What is envisaged for the SNIB runs very much counter to that caricature. The bank is intended to be a public bank that drives transformative change. It is intended to be independent but accountable, and permanent but adaptable, with a long-term patient view. To that end, the committee set out 19 recommendations in our report. Our balanced scorecard reads that roughly half have been accepted, a couple have been declined and the rest are under review, which reminds one, in relation to investment, of the three options that are set out in the parable of the talents.
As I have said, there are several areas in which the Scottish Government has undertaken to lodge stage 2 amendments, and we will study the detail of such amendments in due course. We look forward to further engagement on the Parliament’s role in framing the bank’s missions. On that basis, we recommend that the general principles of the bill be agreed to. I look forward to listening to other contributors to the debate.
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