Scottish National Investment Bank Bill

– in the Scottish Parliament on 21st January 2020.

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Photo of Kenneth Macintosh Kenneth Macintosh Labour

The next item of business is a stage 3 debate on motion S5M-20514, in the name of Derek Mackay, on the Scottish National Investment Bank Bill. I invite members who wish to contribute to the debate to press their request-to-speak buttons now.

Photo of Derek Mackay Derek Mackay Scottish National Party

I am delighted to open this stage 3 debate on the Scottish national investment bank.

The Economy, Energy and Fair Work Committee heard about the bank’s potential from many stakeholders during its stage 1 evidence sessions, not least from Professor Mariana Mazzucato, who told us that the establishment of a Scottish national investment bank has the potential to

“transform our imagination of what the public sector is for”.—[

Official Report, Economy, Energy and Fair Work Committee

, 14 May 2019; c 13.]

Since the bill’s introduction, members have worked together to create legislation that provides a strong statutory foundation for the bank. I particularly thank the members of the Economy, Energy and Fair Work Committee, whose thoughtful scrutiny of the bill led to valuable and informed amendments. I also thank the other members who have been involved in the bill’s passage for the constructive approach that they have taken to developing and strengthening the bill. Finally, I am also grateful to the many stakeholders who contributed to the bill. The bank must speak to all Scotland, and I am confident that we have meaningfully engaged to allow that to happen.

Establishing the bank is about being ambitious for Scotland. I am pleased to see the determination that has been shown across the chamber—indeed, across the country—to ensure that we build a bank that can become a cornerstone institution in Scotland’s economic landscape.

The bank has the potential to transform Scotland’s economy and society. As the vision for the bank now sets out, this is an opportunity to

“catalyse ... a step change in growth for the Scottish economy by powering innovation and accelerating the move to a net-zero emissions, high-tech, connected, globally-competitive and inclusive economy.”

The bill reflects that vision and sets out a high level of ambition for the bank’s contribution to environmental and social wellbeing in Scotland; to driving inclusive and sustainable economic growth; and to enabling small and medium-sized enterprises, innovative companies and enterprising third sector bodies to flourish.

The case for establishing the Scottish national investment bank is overwhelming. Access to finance in the current lending market for many private and third sector organisations can be challenging, which has led to very real impacts on investment and growth. The bank will make a big difference in that regard. It will seek to address those gaps; in particular, it will provide new levels of strategic patient finance.

The bank will also drive innovation in Scotland and will shape and create markets. Its investment can support our efforts to improve the level of business expenditure on research and development in Scotland to the levels in other European countries. The bank can also build on Scotland’s existing strengths, including our world-leading university research sector. Finally, it will crowd in investment from other sources, maximising its impact and enabling activity that otherwise would not take place.

The success of the building Scotland fund is a promising sign of what we can expect from the bank. Last week, I visited an office development in Glasgow that had received funding from that fund. During my visit, I announced that the fund has agreed investments of £100 million, unlocking in excess of £238 million-worth of projects and providing a significant boost to the Scottish economy.

In particular, the building Scotland fund has agreed investments of £75 million in a range of housing projects, supporting the development of more than 5,500 homes and around 600 full-time jobs. The fund demonstrates the exciting opportunities that the bank could support by investing in progressive businesses, social enterprises and third sector organisations right across Scotland.

The bank’s innovative, mission-oriented approach has rightly received much interest. The approach will direct the bank’s activity towards addressing major challenges facing Scotland.

Photo of Derek Mackay Derek Mackay Scottish National Party

No, thank you.

The First Minister has committed to the bank’s primary missing being supporting the just transition to net zero carbon emissions. Harnessing private sector activity to achieve that has never been more important.

The bank is expected to have two other missions, based on examples in the implementation plan. One concerns taking advantage of technology and innovation to benefit Scotland’s people, particularly through responding to demographic challenges. The other will support improvements to places across Scotland. Those missions have been derived from Professor Mazzucato’s guidance in setting out how the bank could adopt missions, and from extensive engagement.

The bank will, of course, seek to make a sufficient financial return. That will enable it to reinvest its funds many times over, in successive generations of business. The bank will also, in time, cover its costs and not be reliant on the taxpayer. I recently updated the Economy, Energy and Fair Work Committee on the latest financial modelling for the bank. I provided indicative projections of the bank’s performance over the long term. Over a 50-year period, the bank is projected to make cumulative investments of £17.5 billion—and that does not account for investment leveraged from other sources. As a result, the initial £2 billion capitalisation would be recycled across the bank’s portfolio more than eight times across the 50-year period, including the initial investment. That is a significant goal that will be achieved only if we are patient with the bank, especially in its early years. We must allow the bank time to reach its full potential.

Photo of Derek Mackay Derek Mackay Scottish National Party

No, thank you.

The bill demonstrates Scotland’s ambition for transforming our economy and tackling major societal challenges. Passing the bill today will mark the next step towards establishing the bank. The bill allows for a robust, credible and impactful new organisation in Scotland’s economic landscape and puts in place the foundations for the creation of a commercially minded yet publicly accountable institution.

I move,

That the Parliament agrees that the Scottish National Investment Bank Bill be passed.

Photo of Dean Lockhart Dean Lockhart Conservative

I, too, thank the Economy, Energy and Fair Work Committee’s clerking team, the witnesses and all those who gave evidence during the passage of the bill. I thank Benny Higgins and the implementation team for their excellent work during the implementation period, and I again thank the cabinet secretary and his team for the constructive manner in which they have engaged during the legislative process.

We have supported the establishment of the bank at all stages of the bill. We agree with the underlying objectives for establishing the bank: that there is a need for more long-term, patient capital; that businesses in Scotland need more help to expand; and that we need a transformational change in Scotland’s economy.

Development banks across the world have shown that that is possible. However, the transformational change will happen only if the development bank is part of a coherent economic policy framework in which there is absolute clarity on the economic strategy and objectives.

The cabinet secretary will not be surprised to hear me say that there is still much work to be done in that respect, as was recognised in the chamber in a previous debate when an all-party motion recognised that

“a cluttered policy landscape can lead to confusion, a lack of alignment, duplication and weakened accountability”.

The concerns about the enterprise landscape were also highlighted at the committee when one witness referred to it as a “Venn diagram on steroids”. That is our overriding concern about the bank’s future success: the bank is being introduced into a confused and cluttered enterprise landscape. To be fair to the cabinet secretary, I think that he recognises that. In his letter to the Economy, Energy and Fair Work Committee of 10 January, he confirmed that

“Wider work is on-going to develop and cement the future relationship between the new Bank and the Scottish economic development ecosystem”.

The success of the transition will be vital to the success of the bank. Will the cabinet secretary commit to providing regular updates to the chamber and the committee about the changes that he will be making as part of the transition?

Photo of Dean Lockhart Dean Lockhart Conservative

I thank the cabinet secretary very much for his brief and positive answer.

Following the establishment of the bank, another priority will be for the taxpayer to see positive returns from it—that is, financial returns and the bank achieving its strategic missions.

With an initial capitalisation of £2 billion and operating costs of up to £20 million a year, the bank will have to demonstrate that it is making a transformational impact across Scotland. We have to remember that those operating costs are in addition to the £120 million operating costs incurred by the existing enterprise agencies.

Photo of Neil Findlay Neil Findlay Labour

Dean Lockhart sat through the committee stages of the bill. It would be remiss of us not to raise concerns, which have been mentioned in the media, including by none other than George Kerevan, about the new chair of the bank, who, in a previous role, was given a record fine by regulators following a conflict-of-interest case. Were those issues raised in committee? I was hoping that the cabinet secretary might address them.

Photo of Dean Lockhart Dean Lockhart Conservative

I am not sure whether Neil Findlay has seen the correspondence between the committee and the cabinet secretary, but I would encourage him to look at it, because I think that it addresses those issues.

We are now—before a single penny is invested in the economy—spending £140 million a year on operating costs across all the enterprise agencies, so we need to ensure that we get a real return from the bank. That should be similar to the returns achieved by the British Business Bank, which has a target rate of return of more than 2.5 per cent. We look forward to the cabinet secretary confirming that he will be setting out the medium and long-term performance targets of the bank once it is up and running.

Another fundamental question that the committee raised is whether there will be sufficient demand in the economy for the additional funding to be offered by the bank. We saw demand being a problem in the context of the Scottish growth scheme, which has invested only a quarter of the up to £500 million that was on offer.

In evidence given to the committee, we were told that the bank will not act as the originator of funding opportunities. That means that the bank will have to rely on the existing enterprise agencies, which are operating under existing budgetary and resource constraints. I ask the cabinet secretary, when he sums up, to confirm whether the enterprise agencies’ budgets will be increased in order to deal with the extra demands on them and the extra opportunities that they will be required to seek out on behalf of the Scottish national investment bank.

I turn briefly to the bank’s strategic missions. The cabinet secretary has been transparent about the grand challenges and the strategic missions that he proposes to set the bank, and, as we heard earlier, the bank’s

“primary mission will be securing the transition to” a

“net zero” economy, and that

“A key element of the Bank’s work will be to help to shape and develop commercially investable low carbon markets.”

I think that everyone agrees with those objectives, but again, we need to see the detail of how all that will be delivered once the bank is up and running. Over the past 12 years, the Scottish economy has failed to see the economic benefit and the real jobs that were promised as a result of the development of low carbon markets; we heard about that during the renewable energy summit held last week. The Scottish Trades Union Congress also made that clear in a report issued last year.

I will wrap up by saying that the relatively easy part of establishing the bank—passing the legislation—will be achieved this afternoon; however, the real challenges lie ahead. Those are: to ensure that the bank recruits the very best professionals to deliver transformational change; for the Scottish Government to reform the enterprise landscape so that all agencies are fully aligned; and for the bank to stimulate demand and make the necessary investments so that there can be transformational change in Scotland’s economy.

Photo of Richard Leonard Richard Leonard Labour

I genuinely believe that today is an important day in the history of this Parliament. A quarter of a century ago, I was calling, on behalf of the Scottish trades union movement, for the establishment of a Scottish investment bank.

I have with me the original report and the original press release, dated December 1995. I point out, for the record, that the demand for a Scottish investment bank has gone unanswered for so long that the paper clip holding the report and the press release together has turned to rust, but the argument still shines and the idea still endures.

At the time, I wrote:

“Scotland is one of Europe's biggest financial centres, yet there is an acute shortage of suitable finance for industrial investment here. This is preventing Scotland from achieving its full economic development potential, and so hampering job growth. This is an area where a Government lead is badly needed...”.

The truth is that that description of the Scottish economy, which was written back in 1995, could just as easily have been written yesterday. We have already wasted too much time—20 years of devolution—when the long-standing and most rudimentary problem of underinvestment in the Scottish economy has not been confronted.

That failure has, in turn, led to chronically low levels of productivity, slow rates of economic growth and job losses. The tragedy is that that has not been tackled head on by this Parliament, even though we have had the powers to do so. Of course, that investment gap has a very long history, with deep roots based on a fixation with short-term shareholder dividends, and with funds accumulated not as capital for investment, but as wealth to be exported. It has its roots, too, in the failure of successive Governments to provide sources of patient capital and long-term investment.

So, Scottish Labour supports the establishment of a Scottish national investment bank with the passing of this bill. Its focus on sustainable economic development and tackling climate change is welcome. Our amendments to drive up ethical standards and labour standards were right, and the people of Scotland will observe that the Scottish National Party lined up with the Tories to oppose many of those proposals. The clear focus on small and medium-sized enterprises is welcome, because, as we have said before, too much of the Scottish Government’s economic strategy is based on the attraction of big foreign direct investment.

I said in the stage 1 debate that the investment bank’s role should not just be to act when there is

“market failure”.

Instead, it must be an agent for change as part of the innovative state—the

“active state”, not the reactive one; the

“developmental state”, not simply the defensive one.

I remain as convinced now as I was 25 years ago that we need bold and ambitious legislation if we are to tackle the long-term, deep-rooted challenges that we face. Scottish Labour will support the bill, but we do not believe that it is bold and ambitious enough. There is too much of an air of tame mediocrity about it, when what we need is courage and ambition.

In the policy memorandum, the Government describes the bank as a catalyst, but the scale of the challenge that we now face requires more than the light touch of a catalyst. We need much more than just a spark. The people of Scotland need a comprehensive economic plan, a proactive industrial strategy and a renewed commitment to full employment in an economy undergoing a just transition to a net zero carbon economy. The bank is undercapitalised, but it must not become an undercapitalised vanity project. It needs to be a meaningful and decisive actor in the Scottish economy, making a meaningful and sustainable difference.

We support the bill, we have amended the bill, we will vote for the bill and we will the success of the bank—this new institution that is long overdue—but the Government must also find the courage of its convictions and will the means to it, too. The cabinet secretary described the bill as world beating. Well, time will tell. With the right direction and the necessary resources, it may be world beating, but in the end, what the people of Scotland need is not world-beating legislation but world-beating action.

Photo of Andy Wightman Andy Wightman Green

I thank the cabinet secretary for his on-going engagement on the bill in the Economy, Energy and Fair Work Committee and for keeping committee members informed of developments in work as it has proceeded, which has been very useful.

As I noted at stage 1, our economy is now run substantially in the interests of private capital rather than in the public interest—in the short-term interests of shareholders rather than in the long-term interests of society. I therefore welcome any attempt to place the public interest at the heart of economic policy. By investing in small and medium-sized enterprises, start-ups and businesses that seek to solve societal issues, a publicly owned bank with a clear vision and mission can complement traditional financial bodies.

Fundamentally, though, the Scottish national investment bank will exist to help to transform the economy by addressing the grand challenges that the cabinet secretary has outlined in briefings to members. Those challenges do not appear in the bill: nevertheless, I understand that they are the overarching framework within which missions will be set. The most important mission is the vital mission to accelerate the transition to a net zero emissions economy.

The establishment of the Scottish national investment bank is the result of many years of work by a range of thinkers, which I now know includes Richard Leonard—a great thinker from 1995. More recently, those thinkers have included the New Economics Foundation, Friends of the Earth Scotland, Common Weal and many others. I want to pay particular tribute, as others have done, to the work of Mariana Mazzucato and Laurie Macfarlane, whose thinking has been very influential in developing the proposals for the bank.

As members know, Greens have set out the broad parameters of a Scottish green new deal. Central to that is the need for investment in a greener economy. The role of the Scottish national investment bank should be central to delivering the transition to a net zero economy. The bank’s ability to provide patient capital should enable it to take a long-term view on investment decisions, which could prove to be transformative for projects that badly need transformational action.

At stage 1, Greens called for the Scottish national investment bank to have a clearer purpose, to work towards net zero goals, to give local government a stake, to give Parliament a say in the bank’s missions, and to have stronger ethics and equalities provisions. We have achieved some of that: amendments that we lodged at stages 2 and 3 were designed to deliver those priorities, including two amendments that were debated—although they were rejected—this afternoon.

However, we have some concerns about the bank. One relates to the report of the Infrastructure Commission for Scotland, which was published yesterday. It says:

The Scottish Government should ensure that its new National Transport Strategy and Strategic Transport Projects Review 2, which are due to be published during 2020, fully reflect the need to deliver an inclusive net zero carbon economy”.

It goes on to say that that should include

“Aligning strategic investment decisions to address fully the requirement for demand management” in transport. It continues:

“For ... roads investment that is made as part of the above” there should be

“a presumption in favour of investment to future proof existing road infrastructure and to make it safer, resilient and more reliable rather than increase road capacity.”

We face significant challenges in transport.

We also have concerns about the potential two-tier pension arrangements, which unions have highlighted to us. I understand that the shadow bank proposals in that regard have been agreed by the cabinet secretary. I point out—I will welcome hearing about this in his closing remarks—that that risks damaging the bank’s chances of providing a fair and progressive wage environment.

We believe that local government should have a significant role in the bank’s projects and missions. All 32 of Scotland’s councils have signed up to Scotland’s climate change declaration, so I look forward to further discussions on that.

The bill is a framework bill. The proof of its success will lie in the bank’s operational decisions in years to come, the decisions that are made by its sole shareholder—the Scottish ministers—and in the scrutiny that the Economy, Jobs and Fair Work Committee applies in its deliberations.

Greens support the bill—we wish it well and will vote for it at decision time.

Photo of Willie Rennie Willie Rennie Liberal Democrat

I thank all those who have contributed to the forging of the bill: the advisers, the committee, the ministers for their constructive behaviour, and Bernie Higgins for his contribution.

The ambitions are big. That is certainly true. The language that is used to describe the bill is sometimes glorious; it will, for example, “transform our imagination”. I am looking forward to that particular event. The expectations are high for reshaping our economy. People will expect that to be delivered, so the responsibilities on all of us to make it happen are keen, especially when the challenges are so great—in particular on climate change and the green economy, which Andy Wightman talked about.

It is important that we use the bank to lever that change, and that we use it in relation to productivity. When we look at the stubborn problems that we have, it is unbelievable that companies that create offshore wind farms have to go, or are choosing to go, to other parts of world—sometimes the other side of the planet—instead of constructing jackets and other turbine elements in this country. What are we getting wrong? Why are we not making that work? What are the steps that we need to take? What are the investments that we need to have? Who are the business leaders whom we need to have in place to make all that happen? Perhaps the bank will play a role in making sure that all that comes together. Who would take the risk of transporting jackets all the way across the globe, with the extra cost of doing that, instead of building them here? Let us rise to that challenge and make sure that we exploit the great opportunity of the energy off our shores.

There are massive challenges in how we cope with our waste. We have seen the delay in the landfill ban. There is an awful lot of infrastructure that we need to build in order to cope with the waste that we are generating in this country.

Our world-class universities—which are among the best, obviously—are producing a huge amount of intellectual property. We still fail to exploit that intellectual property fully for the benefit of people here, and to create jobs, wealth and opportunities.

The bank has many challenges to play a part in and, of course, it does not have all the answers. We need to learn the lessons of previous projects, such as the Scottish growth scheme. That was supposed to be a great game changer for the businesses and economy of this country, with £0.5 billion of investment. It has not been fully utilised; we need to make sure that the SNIB is.

The green investment bank across the UK—in whose setting up we had a role, although to our great disappointment it was privatised later—was making good progress. We should draw on the expertise that was developed through it. What has our own Scottish investment bank done, through Scottish Enterprise, that works, that can succeed and that we can build on for greater success?

My final comment is that there will be great temptation from us in the chamber and people further afield to put pressure on the bank at a time of great pressure on the economy, when much-loved businesses are under great stress and perhaps on their way out. Perhaps they do not have a future; perhaps they are failing businesses. There might be a great temptation for us to pressure the bank into propping up those failing businesses. Nobody wants to see them go, but sometimes we need to ensure that we put the investment into new opportunities and challenges that will create many more jobs.

Of course, the bank should listen to Parliament and should understand what we believe are the political priorities for this country. However, it should also have the freedom to act as it thinks best, so that it can lever in money to create jobs and opportunities, and create the low-carbon green economy for the future of our country and the planet.

Photo of Linda Fabiani Linda Fabiani Scottish National Party

We move to the open debate. Speeches should be no longer than four minutes, please.

Photo of Alex Neil Alex Neil Scottish National Party

To pick up on one of Willie Rennie’s points, I say that the bank’s emphasis has to be on preparing Scotland for tomorrow’s world, not on dealing with the consequences of yesterday’s world. Therefore, concentrating on things such as renewable energy is extremely important in the climate change debate.

However, the bank will be important not just in that sphere of influence. Artificial intelligence will be a major growth area and I believe that it will also have the impact of being a job creator. Robotics and animal life sciences will also be major growth areas. Scotland already has a presence in space technology—I am not talking about the Greens’ policies—with some world-beating developments based in Glasgow and elsewhere. The opportunities are enormous, and I hope that when the history of this period comes to be written by economic historians, it will be marked as a major turning point in the history of the Scottish economy.

I will mention two or three areas in which the bank should take early action, and in which the Government needs to look at the framework within which the bank will operate. The first is exports. Our export performance, in terms of our population and propensity, is way below par, and we have enormous opportunities to expand our export capacity. National investment banks in other countries help their exporters. In evidence to the committee at stage 1, it was pointed out that the assistance that the Finnish Government provides to exporters in Finland is far greater than the totality of all the financial support, in terms of credit guarantees and all the rest of it, that the UK Government provides to the entire UK. Finland, which has a population of 5 million, helps its exporters more than the UK helps our exporters—not per head but in total. That is not just in relation to manufactured goods. For example, a major beneficiary of the export finance that the Finnish investment bank provides is the shipbuilding sector. Shipbuilding is a sector in which we have potential to expand our presence.

Exports is where the bank should go out and create demand for its services. A lot of companies might not realise that if they get the funding to export on a much grander scale, they will have the potential to create many more good-quality jobs in Scotland.

Secondly, on the overall investment, I hope that the bank is so successful that future Scottish Governments have to increase the capital that is available to the bank to meet demand. We should all hope that.

The important point is that this is not just a £2 billion investment, and over the period of 50 years that Derek Mackay mentioned—which I hope to see—it does not have to be just £17.5 billion. It could be three, four or five times that, because one of the central features of the bank is that it will lever in private capital, including capital from elsewhere. If it does that on merchant bank ratios, or even near to them, we could be talking, over the piece, about £100 billion instead of £17.5 billion. That is extremely important.

Let me also say this. Members should look at the experience of the Scottish Development Agency, which was set up in 1975. It provided many similar services, but because one or two of its investments turned rotten, we abandoned the whole exercise. That was utter madness.

We have to say to the Scottish national investment bank, “Take risks.” There is no point in setting it up if it does not take risks, and if it takes a risk that does not work out, let us not hammer the bank. Let us not politicise or weaponise the SNIB in Parliament. Let us say, “Go out and take more risks.” In merchant banking, only two out of every 10 risks pay off, but those two pay for the other eight many times over. Let the bank be not only about public ownership, but about public enterprise levering and mobilising private capital to transform the Scottish economy.

The Deputy Presiding Officer:

Speeches should be of no more than four minutes, please.

Photo of Gordon Lindhurst Gordon Lindhurst Conservative

We are agreed that national investment banks can play a valuable role in facilitating economic growth

. I am not sure that I understood—or misunderstood—Alex Neil’s speech or whether he was advertising himself for a future role in promoting the Scottish national investment bank.

Investment banks can play an important and positive role, but there is a significant caveat: to do so, they have to be well run, with clear policy objectives, and they must be given relative freedom from direction by state-run interests, the public sector and national Government. That is what we see in other successful examples of such banks around the world.

Over the past decade, the Scottish Government has spoken positively about the possibility of creating a body such as the one we are discussing and about its potential role in our investment in the future of Scotland. It is therefore good that the dream has not turned into rust—unlike Richard Leonard’s paper clip—and that we have this bill before us in the Parliament.

As most of us know—I hope—in general terms, business and investment function far better when the long arm of the state does not lie heavily on their shoulders and when business leadership and expertise are able to decide the direction of travel. However, national investment bodies can make a real difference in pursuing wider public goals when they operate successfully alongside private enterprise—for example, on targets for sustainability.

Nevertheless, we must be cautious that such a body does not crowd out private finance, as we have seen happen on some occasions with certain similar bodies such as the European Investment Bank.

As Willie Rennie has emphasised, we need proper leadership for the bank. That means leadership that seeks to prevent public money being used to prop up failing ventures. We have seen too many of those, throughout history and more recently, and the massive cost that poorly placed public investment can have economically and on the taxpayer and people’s pockets.

The Economy, Energy and Fair Work Committee heard evidence that the Scottish national investment bank could deliver better and more sustainable approaches to investment. I welcome its commitment to investing patient capital across a wide range of sectors—investment that will be intended for long-term prosperity and not just for aesthetically pleasing short-term gains.

As has been touched on, there is a disparity between the proposed public body, with a capitalisation of £2 billion, and the example of an existing bank, the Royal Bank of Scotland, which alone has a Scottish loan book of £14 billion. Let us hope that the bank is successful and can build on that rapidly to move beyond the £2 billion figure.

In countries such as Finland, where national investment structures are particularly good at offering instruments like debt financing to major infrastructure investors and at supporting guarantees, we have an example of a successful approach.

We would like more clarity on where the SNIB is to sit in the already-crowded landscape in Scotland, with Scottish Enterprise and the Scottish growth scheme. I would appreciate it if the cabinet secretary could give us a bit more clarity on that in his closing remarks. The bank will be joining a crowded field, and we do not want a false start for it. Let us hope that this is the start of something new, positive and constructive that we can, and will, all support.

Photo of Jackie Baillie Jackie Baillie Labour

I support having a Scottish national investment bank. It is fair to say that it has been a long time in coming. I think that John Swinney—clearly behind Richard Leonard in doing so—announced it a decade ago and re-announced it every year thereafter, because there was no money to capitalise the bank. That was until the UK Government came up with financial transaction money, the future of which is in doubt. Keith Brown described it as “funny money” at the time, but we now embrace it as a positive capitalisation of the SNIB.

The Scottish Government tells us that, if financial transactions are discontinued after March 2021—which is a real possibility—the bank will have to rely on traditional capital or the Scottish Government’s borrowing powers. The borrowing limit is £400 million a year, not taking into account the normal Government spending commitments that are made for public sector infrastructure such as schools, hospitals, health centres and roads. There is simply not enough money to do all of that and fund the bank as well.

If that source of funding—financial transaction money—is not there after March 2021, the SNP will need to find £1.5 billion. However, instead of pausing, the Scottish Government is intent on pressing ahead to set up a bank that might not have any money. We need an urgent response from the UK Government, or we are in danger of creating a white elephant.

At stage 1, I asked whether a review had been undertaken of whether that was the most effective means of having an investment bank and whether the Government had considered working with the existing Scottish Investment Bank within Scottish Enterprise. Unsurprisingly, no review had been undertaken in advance of the bill, so there is little evidence-based policy making. I have estimated that the cost to the public purse before the bank breaks even will be £80 million; others put it higher than that. The future remains uncertain, and that is what we should concern ourselves with.

I want the bank to succeed, as the cabinet secretary does. However, I am genuinely concerned. I know that the cabinet secretary has written to the Chief Secretary to the Treasury about increasing the Government’s borrowing limits. Has he had a response or any assurance that the financial transaction money will continue? Can he offer any comfort to the chamber that we are not creating a bank with no money to spend? I would welcome an intervention from the Conservative members, telling me that everything will be okay—but they are not standing up.

Photo of Dean Lockhart Dean Lockhart Conservative

I did not catch the beginning of her statement, but if Jackie Baillie is asking whether more money will be coming from the UK Government as part of the budget process, I am very confident that the answer will be yes.

Photo of Jackie Baillie Jackie Baillie Labour

I am asking very specifically whether financial transaction money will come after March 2021 to fund the SNIB. Is it a yes or a no?

Photo of Jackie Baillie Jackie Baillie Labour

Yes or no? He cannot reply.

The Deputy Presiding Officer:

Mr Lockhart is speaking, Ms Baillie.

Photo of Jackie Baillie Jackie Baillie Labour

It is my speech, Presiding Officer.

Photo of Dean Lockhart Dean Lockhart Conservative

The money is fungible. It is up to the cabinet secretary to decide how to use the increased funding that is coming from the UK Government.

Photo of Jackie Baillie Jackie Baillie Labour

That explains why I am concerned about the continuing uncertainty. We did not hear anything to reassure us.

Let me finish on a note of consensus. I am grateful for the cabinet secretary’s approach to working with the committee on the bill. He has been prepared to compromise and challenge thinking on what can be enshrined in legislation—everything from equality strategies and equal pay audits to the ability to invest in co-operatives and social enterprises. All of that is positive, but, as we have heard, the bank is in danger of not having the money that it requires. However, if it does get off the ground, it will be in better shape to guide investment decisions than when the bill was first introduced, and for that reason I commend the bill to the chamber.

Photo of Colin Beattie Colin Beattie Scottish National Party

Jackie Baillie was actually making a good case for independence with her arguments about funding.

I welcome the establishment of the Scottish national investment bank, which has the capacity to transform Scotland’s economy and to provide us with a more sustainable and green future. I followed the progress of the bill through my membership of the Economy, Energy and Fair Work Committee, and I think that the committee did some positive work on shaping parts of the proposals.

I have spent 23 years overseas, working as an international banker, and 11 years working for an investment bank in the City of London, and I have seen the benefits that other countries gain from institutions such as the Scottish national investment bank. I see huge merit in the proposal, if it is implemented correctly. It is about time that we revolutionised our economy to support our evolving society, and we should invest in creating a bank that will impact on societal and environmental change. The bank should be a smart development that will be commercially minded and publicly accountable. It will give us slightly better control over our economy, allowing us to create and shape our markets and define how our economy develops, as well as what we prioritise for public investments.

A main concern of the debate, which we should all be able to agree on, is the need to prioritise tackling the climate emergency. Global warming requires urgent and innovative answers, and we need to start factoring in new and creative strategies that tackle climate change in all areas of policy. The Scottish national investment bank could play a key role in addressing that task by supporting industries that are working towards achieving net zero carbon emissions. If we focus on creating a bank that prioritises ethical investments and creates robust structures that encourage greener policies to facilitate a transition to a net zero emissions economy, we could create an economy that will lead the way, globally, in ethical banking investment.

That would, of course, require the bank to be well regulated and subject to rigorous ethical standards. It is a measured and sensible approach to have the bank’s board as a responsible body for implementing minimum ethical standards in relation to its investment decisions and for ensuring that those standards are adhered to. I welcome amendment 5, which accounts for that and allows the necessary flexibility. The primary mission of the bank should be clearly connected to making investments that are ethical.

An element of the bill that I think is particularly important is that the bank should address the current lack of providers of strategic patient capital. That will support companies with ambition and will provide the opportunity to advance smart investments in smaller companies with potential by giving them a smoother start in their development. We can invest in Scottish companies that provide local knowledge and that understand the unique economic strengths and challenges in Scotland. That not only will support our economy now but will set us up for a much more secure future, as we will be able to choose to support those who prioritise achieving net zero emissions.

It is time for an economy that can be shaped to reflect major societal changes. Having a bank that is flexible to the needs of our population is a sensible, logical approach for our economy. Of course, the bank will also have to make a profit or, at least, break even, so normal commercial structures will, of necessity, have to be in place to avoid unsustainable losses. Prudence and innovation can go hand in hand.

We have the chance today to pass a bill that is visionary and that will place Scotland as a country that is committed to transitioning to net zero while simultaneously growing a sustainable economy that improves the lives of our citizens. The Scottish national investment bank has the potential to advance our economy as well as to help us to achieve a fair and inclusive Scotland. That will help us to bring about the transformational change that is essential to sustaining and developing Scotland’s position as a vibrant economy that is prepared for the future. We can support our population now and better prepare for the generations to come through these proposals. Scotland can continue to be a global leader in the transition to a low-carbon economy while promoting growth that is inclusive, smart and sustainable.

I commend the bill.

The Deputy Presiding Officer:

We move to the closing speeches.

Photo of Rhoda Grant Rhoda Grant Labour

I thank the clerks and those who gave evidence and worked on the bill. They are often forgotten at this stage in the process, when we see the bill go through. However, the work that they do ensures that the bill is created properly.

We support the bill and the creation of the Scottish national investment bank. We want the bank to be properly financed so that it can help to grow the Scottish economy and tackle, fairly and ethically, the grand challenges that we face, such as climate change and various issues in the Scottish economy.

As Richard Leonard said, the bank must be bold and ambitious. It also needs to be adequately funded. Jackie Baillie talked about financial transactions not being guaranteed past 2021. What then for the bank? Alex Neil talked about the increased investment that may be required to meet demand, if the bank is a success. Willie Rennie spoke about other great hopes that have not delivered, and the lessons that we must learn from them for the bank.

We need a bank that is properly capitalised to deliver on the ambitions that we have for it. We understand that there has been a transfer of Scottish Enterprise funds, but we do not know which funds, or how much capital is involved in that transfer. We need clarity and reassurance about how the bank will be funded, because funding will be crucial to its success.

Many speakers talked about the cluttered landscape in relation to vital and much-needed support for Scottish business. Labour members have long called for an industrial strategy to co-ordinate the various aspects of support and strategy in the Scottish economy. Government cannot work in silos; it needs to be more joined up. We again call for an industrial strategy that does that.

Gordon Lindhurst talked about competition with the private sector and the need for the bank to do something different. A number of speakers referred to the need for patient capital and the ability to take risks in the public interest. Our research and development in Scotland is innovative, but when it comes to taking it to market, we fail. The bank needs to be at the forefront of addressing that. It also needs to be at the forefront of investing in non-traditional businesses, such as co-ops and social enterprises, which often have difficulty in getting investment from other sources. The bank needs to look at growing those businesses, because they are able to grow local economies.

The bank also needs to look at supporting indigenous businesses. We often see a rush to encourage businesses to relocate to Scotland from overseas, but we need to make sure that we are growing and financing our own businesses, because they are much more likely to stay with us.

Amendments were supported today that will improve the bill, particularly Jackie Baillie’s amendments on gender equality. It is disappointing that in 2020 we are still fighting for gender equality and that we have a gender pay gap of more than 5 per cent; indeed, the pay gap is much higher in banking. The bank must lead by example, embedding the ethos of equality not only in its own business, but in the companies and organisations that it seeks to support. We are disappointed that the amendments that we lodged around workers’ rights were not agreed to, because we believe that they would have improved the bill. We still have concerns about pension and pay disparity in the bank, and we hope that those will be dealt with. We do not want the bank going down the road that banks have gone down in the past, especially in relation to pay and bankers’ bonuses.

We support the establishment of the Scottish national investment bank. We desperately need it to succeed. We want it to be bold and ambitious. The Scottish economy needs to grow, and we need an industrial strategy that will underpin that.

Photo of Jamie Halcro Johnston Jamie Halcro Johnston Conservative

After more than a decade of the Scottish Government’s promoting an investment bank project, we finally reach this milestone. As my colleague Dean Lockhart suggested, Conservative members have approached the SNIB with positivity. However, we have also had concerns about its future direction. A number of those concerns have been raised as the bill has progressed and the promised achievements of the bank have been set out by ministers. Many of those issues are not to do with the legislation; they will be resolved by building a bank with a positive institutional culture that will meaningfully contribute to Scotland’s life and economy.

At stage 1, Conservative members gave the principles of the bill our support, and we will support the bill again today. However, that support is balanced with a strong feeling that this could have been done better, that greater clarity over the Scottish Government’s approach could have been provided, and that a more coherent approach could have been found to the overall question of business support. We look, for example, to the problems that have been faced in the context of the Scottish growth scheme. We need a bank that will hit the ground running and that will not be artificially restrained in its activities.

A concern of mine has been how the bank will deliver for my constituents and businesses in the Highlands and Islands. As I said during stage 1, the economic landscape of the Highlands and Islands is quite different from that of other parts of Scotland. That is recognised by long-established bodies that operate in the region—chief among them, Highlands and Islands Enterprise, which can trace its origins back through the decades to the old Highlands and Islands Development Board.

I noted the geographical coverage of the Welsh Development Agency, which had a number of offices, spread across Wales. However, I appreciate that the presence of an office in Inverness or elsewhere would not automatically solve potential problems with centralisation; the approach would have to be wedded to robust operational independence.

Just as important in regions such as mine, a balance must be found between rural development and simply concentrating on the main population areas. Directing development in one or two towns will not make a real difference to the Highlands and Islands. Development and the promotion of economic convergence will require a genuine focus on the remote and rural areas that suffer from underdevelopment and lack of amenity.

There must also be sensitive consideration of the needs of the wider community. The width of the old development board’s social remit was unprecedented. That was not a restraint; it was the basis of a vision that was decentralised and in many ways effective.

Similarly, the national investment bank must avoid the clarion calls to broaden its remit too far. A central focus on economic growth and employment will be key to the success of the bank’s missions.

We have spoken of our concerns about the Scottish Government’s forecasts on returns and the tension that is created in relation to the provision of patient capital. There will always be an inclination to see short-term returns, but such an approach does not require a publicly owned investment bank.

Conversely, we must have a metric of success. The bank should, in time, prove itself to be objectively valuable. It must not be a black hole for public money. It cannot become a mechanism whereby millions of pounds of public money are lost in unsustainable investments and failing enterprises. Above all, the bank must have the operational independence to work effectively, exercising proper stewardship of investments without regular meddling by politicians.

As we look towards the Scottish national investment bank building and growing, we must have a clear picture of where it will sit alongside commercial investment and other public sector support schemes. As my colleague Dean Lockhart has said since the bill’s inception, there is a significant question about the already cluttered landscape for business support and economic development.

To take the Highlands and Islands perspective, effective economic development will require co-operation from across Government, and a range of public bodies will have to work together. As we know, that is not always as easy as it sounds. In a co-ordinated approach to economic development, it will be important that the SNIB is more than just another public body in the room. Gordon Lindhurst highlighted the success of the Finnish model and called for more clarity on how the bank will operate in the current landscape.

Dean Lockhart highlighted the operating costs of £20 million per year and mentioned the £120 million operating costs of all the existing enterprise agencies. The bank will need to demonstrate its transformational impact. He also, rightly, talked about demand, which is a problem that has impacted on the success of the Scottish growth scheme.

I agree with Dean Lockhart that passing the bill is the easy part—Richard Leonard rather suggested that, too, when he talked about the need for “not world-beating legislation but world-beating action”. The cabinet secretary talked about his ambition for the bank and its potential. The bank will need to deliver in that regard.

As an aside, let me say that it was good to hear Alex Neil reassure us that he intends to be around for at least the next 50 years. I am not sure how well that will go down on his party’s front bench.

The Scottish national investment bank will be measured on its outcomes and not on its intentions. As the Economy, Energy and Fair Work Committee has explored, there are significant shortcomings in business support in Scotland. Whether the bank is the answer to those problems remains to be seen. It has the potential to do a significant amount of good, but it must have an ambitious and positive vision for all Scotland.

Photo of Derek Mackay Derek Mackay Scottish National Party

The debate has been constructive and consensual, which I think reflects the widespread support for the bank. I think that the bill process has helped to strengthen the bank and give it a stronger footing, and to capture the aspirations of others.

Before I pick up on a few of members’ comments, I issue a plea to members to avoid abbreviating the Scottish national investment bank to “SNIB”, as that means something different to some people, particularly in the west of Scotland. I ask that we call it by its full name or abbreviate it to “the bank”, and do not call it “SNIB”, as Dean Lockhart did—not that I am naming any individual members.

On a serious note, Willie Rennie raised the important point that the bank must not invest in what might be perceived as failing businesses. I will not get into definitions, but the bank must be about investing for now and the future, and it must not be seen as responding to pressure from parliamentarians. The bank will have operational independence.

The bank will also be ambitious. I confirm to Jackie Baillie that I have reached out to the Treasury for further reassurance around financial transactions and borrowing limits, and I will share the response with Parliament once I have it. However, we can still be ambitious about what we want to do—I have set out the scale of our ambition.

Richard Leonard spoke about patience—patient finance and his own patience in waiting on the Scottish national investment bank. However, I point out gently that the Labour Party was in power in Westminster for 13 of those years and in power in this Parliament, after devolution, for eight of them. There is now consensus on what we need to do, and we will get on with the job.

We have a very active industrial policy, which leads to actions that support the economy and address industrial challenges when they arise. A number of members have made points about the landscape and which agency does what. We will return to that matter, but I will say that we do not want duplication. We want efficiency and the maximum amount of support to go to businesses and enterprises directly, including those in the third sector, as has been said throughout the bill process. Alex Neil was right to speak about investing in future industries, sectors and enterprises that will be successful.

A number of members referred to the compromises that we have made during the bill’s consideration and to who saw the light first with regard to which amendments were the right ones. I think that the bill is now shipshape enough to allow us to get on with building the bank, and I hope that there will be agreement to the bill at decision time.

The expertise and experience of the British Business Bank and the Development Bank of Wales have guided the creation of our own bank. There will be the appropriate allocation of resources, which will include calibrating what the enterprise family will do.

I believe that the bank will be transformative. I believe that the missions are guided by the grand challenges that we face as a country. I believe that it will support small and medium-sized enterprises. I believe that, through the design of the bank’s financial products, we will be crowding in investment, rather than crowding it out. We will deliver additionality and we will ensure that sustainable economic growth happens that otherwise would not happen. We will do that sustainably and ethically. Patient finance will be transformational in comparison with what we have done before.

I thank all those who have worked on the bill, including the visionaries who called for it, those who helped to shape it, the clerks, all the various teams that have worked on it and our advisers. The bill has led to a strong vision of which we can all be proud.

The next step is parliamentary input on establishment of the bank. The Government will publish the draft missions for consultation, and that work will be taken forward, as I have described, with clarity, support and consensus around those missions.

As all members have reflected, we will also build demand for the bank, so that there is a queue—a pipeline—of investments that we can make. All the necessary recruitment and organisation building are going on now. While we build excitement about the bank, we must also ensure that it can deliver a very active economic policy that will support the vision that we have set out.

I believe that we are right to be ambitious for the bank and about the scale of our ambition for the bank. I believe that, given our determination and the impetus that there has been so far, it will absolutely be a success.

I will reflect further on the comments that members have made. I appreciate the joint working that has taken place to get us to this position. I trust that members are confident that we have a very strong legislative foundation on which to take the bank forward and make that positive difference that all members wish to see.

I ask all members to vote in favour of the Scottish National Investment Bank Bill at decision time.

The Presiding Officer:

T hat concludes the stage 3 debate on the Scottish National Investment Bank Bill.

If no member objects, I am minded to accept a motion without notice to bring forward decision time to now. I invite Maurice Golden, on behalf of the Parliamentary Bureau, to move such a motion.

Motion moved,

That, under Rule 11.2.4, Decision Time be brought forward to 5.34 pm.—[

Maurice Golden


Motion agreed to.