The last twelve months have been a turbulent time for Scottish politics – a year in which controversy and allegations of financial impropriety have never been far away. Of course, the major story of 2023 was the resignation of Nicola Sturgeon and the criminal investigation into whether she, her husband Peter Murrell, and former SNP treasurer Colin Beattie misused £660,000 worth of party funds.
However, it has also been a tricky year for one of Sturgeon’s creations, the Scottish National Investment Bank (SNIB). The Bank was established in 2020 as a “development investment bank for Scotland, delivering patient, mission impact investment to the Scottish economy” and was envisaged by Sturgeon as a pseudo-sovereign wealth fund.
However, following a Disruption Banking investigation that started in June, the SNIB has come under fire in Holyrood amidst unanswered questions over its handling of potential conflicts of interest, its lack of legally mandated governance structures, and its poor performance to date.
Conflicts of Interest
In June, Disruption Banking revealed that the Bank had invested in three companies with close links to the Scottish Government. On three occasions, the SNIB invested British taxpayers’ money totalling £16.5 million in companies where senior figures had also served on Scottish Government advisory boards. Critics fear that there is at least a perception of Scottish business leaders with government relationships having an unfair advantage in accessing public money, although the Bank and the companies involved said that all the relevant due diligence procedures were followed.
Disruption Banking also revealed that the Bank invested £5 million in a company partly owned by one of its own directors. Carolyn Jameson was appointed a director of the Edinburgh-based IT firm Forrit in June 2020 and a non-executive director of the SNIB in November the same year. Jameson resigned from her position at Forrit in February 2023 and, a few weeks later, Forrit secured £5 million of taxpayers’ money from the Bank. Jameson retained a personal financial interest in Forrit, owning shares worth £272,000. The SNIB said that all the relevant due diligence procedures were followed.
On another occasion, the SNIB invested in a company whose CEO had family connections at the Bank. The CEO of Travelnest, Doug Stephenson, is the brother of an analyst that worked at the SNIB around the time when the company secured £7.5 million of taxpayers’ money from the Bank. At the time, Travelnest was also a loss-making company that had failed to file company accounts for two years. The SNIB said that all the relevant due diligence procedures were followed.
The Times also raised questions about potential political conflicts of interest, reporting that Nicola Sturgeon personally intervened in the decision to offer a £9 million loan to Circularity Scotland – which later went into administration and left taxpayers with millions of pounds’ worth of losses. The SNIB said that all the relevant due diligence procedures were followed.
The SNIB consistently said that the Bank maintains a “conflicts of interest register” to help manage such cases, but when Disruption Banking asked to see this document, they replied that it is not a public document. Questions have been raised about these cases in the Scottish Parliament.
Lack of Governance
One of the reasons that parliamentarians, such as Douglas Lumsden, have raised concerns about the SNIB in the Scottish Parliament is that the Bank appears to lack the governance structures that would put it in a better position of resolving such questions.
Disruption Banking revealed that Scottish ministers have not established an advisory board for the Bank, despite being legally obliged to do so under the Act that created the SNIB in 2020. Section 29 of the SNIB Act passed by Holyrood states that “the Scottish Ministers must establish and maintain an advisory board to provide [the SNIB] with advice on the Bank’s objects, conduct, and performance.” However, after more than three years, this advisory board has not been set up.
Despite this, the Scottish Government continues to insist this failure has no bearing on the lawfulness of the Bank’s operations although they are apparently now working to create the advisory board (at last).
Even senior SNIB executives are candid about the Bank’s failures in this area. In July, Disruption Banking published correspondence showing Eddie McAvinchey, Executive Director at the SNIB, telling a colleague that “our committee processes are terrible here.”
Poor Performance
Critics of the SNIB argue that this lack of oversight is part of the reason for the Bank’s poor performance since commencing operations. Indeed, the Bank has so far made just a 2% return on the £460 million of taxpayers’ money that it has invested. Given that commercial banks are currently offering savings rates of 5% or more, this means the SNIB would have achieved stronger returns by simply leaving the cash in a bank account.
The Bank has been on a public relations-blitz in a bid to repair its image in light of all these failures – a blitz that taxpayers are also paying for. Taxpayers are set to pick up a bill of £360,000 as the Bank seeks to hire a public relations firm “to build the reputation of the Bank” after a year of scrutiny. Whether these efforts will prove to be successful as we head into the New Year is, of course, another question…
Author: Harry Clynch
